LAHORE - The business community has opposed the decision of substantial raise in withholding tax on import of industrial raw material from one per cent to five per cent without talking business community into confidence and without realizing the impact on trade imbalance of the country.
Raising serious concerns on anti-industry and anti-export policy of the FBR, they observed that authorities have taken short sighted decision at a time when trade deficit of the country has already crossed the figure of $ 21.27 billion in 2011-12 due to high imports of $ 44.92 billion against $ 23.64 low export.
They said that export-oriented industry is already in shambles due to acute energy crisis coupled with impact of war on terror and the recent SROs will add further difficulties, creating liquidity problems for the exporters.
They observed that manufacturers were already facing severe cash flow issues due to deduction of 3.5 per cent withholding tax on supplies to customers as well as withholding tax at imports.
APBF chairman Nabeel Hashmi said added that authorities should have done proper homework before issuing such policies. He further added the economic planners have never calculated the amount of money being paid on borrowings from IMF and other institutions in shape of interest and cost of technical assistance. After deduction of expenses and installments of previous loans the net transfer to Pakistan is most of the time in minus resulting into debt trap for the country. Central president Rashid Mehr explained that all countries keep their export sector free of all taxes, direct or indirect. It is well known principal all over the world that any export item must shed all duties and taxes and logic of FBR to apply uniform rate of 5 per cent withholding tax at import stage is myopic.
Textile sector representatives said this measure would unnecessarily burden the textile exporters with Rs10 billion of refund claims, as textile industry annually imports cotton worth $1 billion and fibers worth $1 billion.
Auto sector representatives said that the local auto industry is already at its lowest web as car sector’s production has declined by 30 per cent in first half of the current fiscal year, while tractor industry is still trying to recover from last year’s recession.
They asked the FBR to concentrate on expansion of tax base by bringing the undocumented sectors into the tax net, rather than squeezing the sectors which were already documented. They supported the FBR chairman’s efforts to boost tax revenues, saying the business community would do it best to help the board in collection of taxes.