Mini-budget to increase cost of businesses by 17pc: FEBR

 

 

Lahore: The Friends of Economic and Business Reforms (FEBR) has said that the mini-budget will increase the cost of businesses by 17 percent, as the FBR has shifted many exempted and zero-rated goods to flat general sales tax rate of 17 percent which will spur the inflation further.

FEBR President Kashif Anwar said that the FBR could not succeed in broadening the tax net resulting in squeezing existing tax payers. Pakistan lacks culture of tax compliance due to unfair taxation system. Harmful taxation that hinders business and trade in the country should be eliminated. We firmly believe that broad based reforms in taxation system with the consultation of private sector are need of the hour. Instead of enhancing the tax base, government’s total focus is on those who are already in the tax net. First of all, the FBR should go against those whose information is with them and who are not filing their tax returns.

He said that the FEBR has been pointing out to bring those retailers into the tax net whose area of shop is more than 1000 sq ft as there is no correlation of area with sales. On the contrary, now the FBR is bringing those retailers in the Tier-1 category whose deductible withholding tax under sections 236G or 236H of the Income Tax Ordinance 2001 during the immediately preceding twelve consecutive months has been exceeded the threshold as may be specified by the Board through notification in the official Gazette, whereas section 236G has no nexus with the retailers it is only for Wholesalers, Dealers and Distributors. Again those who have been paying or paid tax and not any new comer in the tax net.

Kashif Anwar said that through Finance Act, 2019, it was made mandatory to mention name, address, registration number of registered buyer and NIC or NTN of the unregistered buyer. The Act also provided that if it is subsequently proved that CNIC provided by the purchaser was not correct, liability of tax or penalty shall not arise against the seller, in case of sale was made in good faith. The new bill proposes to omit this proviso which means that seller will be liable for tax or penalty in case the CNIC provided by buyer is not correct.

Again the same story, buyer does not want to give their details and seller will be responsible if the information given by the buyer is not correct. This will create problems for businesses. Through Finance Act, 2021, the turnover for cottage industry was enhanced from 3 million to 10 million.

Now the bill proposes to reduce this threshold of annual turnover from 10 million to 8 million. On the other hand, the government wants to facilitate SME and encourage new entrants. The inconsistency of policies restricts businesses from making long term prospects and investments.

He expressed concerns over the approach of the government for not taking the industry and trade into the consultative process over mini-budget. If all the measures demanded by the International Monetary Fund (IMF) are implemented, the people of Pakistan and the Small and Medium Enterprises (SMEs) will have to endure an enormous burden of billions of rupees tax.