LAHORE  - Small and Medium Enterprises, in their budget proposals for 2015-16, have recommended the federal government to increase income tax exemption limit up to Rs600,000, enhance cash withdrawal limit up to Rs100,000, besides reducing corporate tax to 30% and 20% for small companies.

According to experts, SMEs are the most important segment of Pakistan’s economy. They contribute 40% to GDP, over 40% to exports and provide significant employment opportunities. There is a need to provide necessary support to overall SME sector to achieve the policy goals as set out in Pakistan Vision 2025.

Reduction in withholding tax on profit on deposit and rationalization and incentives for import of machinery for SME sector has also been recommended. Furthermore, cut in sales tax rate on raw material and other procedural measures have been proposed to ease the cost of doing business for SMEs.

The Small and Medium Enterprises Development Authority has proposed an export credit guarantee insurance scheme besides increasing the income tax exemption and decreasing the corporate tax for SMEs in the upcoming federal budget. The SMEDA, as an SME promotion agency, has developed budget recommendations for FY 2015-16 and submitted to Ministry of Industries & Production, Ministry of Finance and Federal Board of Revenue, seeking special attention for SMEs in the national budget.

SMEDA CEO Alamgir Chaudhry has said that the proposals had been developed in consultation with SME stakeholders, trade associations and Chambers of Commerce and Industries.

To enhance SMEs integration in global value chain, various measures have been recommended to reduce tariff barriers. In order to enhance SMEs share in total exports, an export credit guarantee insurance scheme has been proposed to protect exporters from external risk. Incentives for SMEs to obtain quality certification and patent registration, access to modern technology, alternate energy sources and cleaner production techniques are also being recommended to enhance overall sector competiveness. To address the issue of SMEs access to finance, various development initiatives such as leasing, factoring, credit guarantees should be encouraged.