LAHORE   -   Expressing concerns over reports of increasing tax collection target by Rs1.6 trillion for coming fiscal year, business community feared that existing taxpayers would be the ultimate sufferers. The community believed that withdrawal of zero-rating regime will adversely affect export while taking back subsidy on electricity and gas would increase input cost that would ultimately damage production.

Free fall of rupee against dollar has led to increase in cost of raw material and machinery, leading businessmen said, adding, the trend would make the life of the masses miserable by increasing inflation. They suggested the government to take other measures like controlling expenses and broadening tax net to come out of the prevailing crises.

“We want Pakistan to come out of the prevailing crises. We have no issue with the increase in target of tax collection. We fear that existing taxpayers will be the victim. Instead of overburdening the tax payers, the government should check unnecessary spending and take measures to broaden tax net”, said Almas Hyder, President Lahore Chamber of Commerce and Industry.

“Increase in sales tax and income tax rates will affect business. Heavy taxation and withdrawal of already given relief like subsidies will affect industry, increase unemployment and inflation”, he said, adding, measures like reducing expenditure incurred on dead state owned enterprises could be step in the right direction.  Referring to devaluation of rupee, he said that it has failed to increase volume of exports.

“Imports/exports are elastic. Devaluation has not increased exports. It has slightly decreased imports. Devaluation also increases cost of raw material, fuel and machinery. As such it will affect manufacturing. There is need to support rupee as free fall will encourage growth of informal economy”, he said.

Withdrawal of zero-rating regime would result in disaster for export-oriented industries that would lead to foreign exchange loss, unemployment and cut in the revenues of the government, said Faheem-ur-Rehman Saigol, Vice President LCCI. He said that discontinuation of zero-rating status for textiles, leather, carpets, surgical instruments and sports goods would be a big mistake.

“Five-zero rating sectors are documented and contributing around 70% of total exports and 50% employment. Exporters are already under stress due to high input cost, heavy taxes and large number of duties. Discontinuation of zero-rating regime would only add to the problems. Zero- rating regime has helped increasing exports and resolving the issues of liquidity, refunds and flying invoices. Its discontinuation would be a blunder”, said Saigol, Chief Executive Officer of Mujahid Enterprises, leading importer of artificial leather, labels cloth, micro fiber and different items for Sialkot sports and sportswear industry.

Discontinuation of zero-rating regime would have adverse affects on export-oriented sectors, said Syed Ali Ahsan, Chairman All Pakistan Textile Mills Association (APTMA). He said that stuck up of refunds would be major problem.

Prior to zero-rating regime, he said, wrong registration of taxpayers and flying invoices was a common practice. He said the proposed 17% sales tax and subsequent refund of the same would choke down the entire value chain. The industry could not afford loans at 15 to 17 percent interest rate, pay input tax and then wait for its refund for a prolonged period, he said. The revenue from local sales of these five export sectors could be increased by bringing the retailers in the tax net through normal or fixed tax regime, he said, adding, the fruit of recent energy policy would be wasted if the government stuck to the plan of discontinuing zero-rating regime and withdrawing subsidies on fuel. The industry is set to takeoff with order books being full and expansion and greenfield projects just awaiting new five year textile policy, he said, adding, any wrong decision would stop the production wheel of the exporting industry.