KARACHI: The Karachi Chamber of Commerce & Industry (KCCI) has emphasized the need for out-of-the-box solutions to prevent further deterioration of the economy. It urges decision-makers to have a better understanding of the ground realities of Pakistan’s economic landscape and business dynamics.
In its Federal Budget Proposals 2023-24, KCCI stressed that the Ministries of Finance, Commerce, and the Federal Board of Revenue (FBR) must go beyond traditional approaches and come up with innovative solutions to revive the economy. It identified several key economic issues, including depleting forex reserves, restrictions on imports of raw materials and essential goods, limited opening of LCs for industrial raw materials, declining foreign exchange inflows, reduced revenue collection due to decreased imports, declining exports caused by high energy costs and shortages of raw materials, narrow tax base, tax evasion, low agricultural productivity, and stagnation in the real estate market.
KCCI proposed various measures to address these challenges. To overcome the scarcity of foreign exchange and declining inflows, it suggested allowing importers to arrange foreign exchange payments through their own sources outside Pakistan. They should also receive import documents directly from suppliers without involving domestic commercial banks. KCCI expressed concerns about the role of commercial banks and their varying exchange rates, which adversely affect industries and small and medium enterprises (SMEs).
To comply with IMF conditionalities, KCCI recommended exploring alternative avenues to enhance revenues, such as withdrawing exemptions from specific regions and reducing government administrative expenses, cabinet size, and retirement benefits for officers. It called for streamlining audit functions under a single provision of the Income Tax Ordinance, ensuring transparent parameters and curbing the powers of tax officials to restore taxpayers’ trust.
The chamber proposed treating CNIC numbers of unregistered buyers provided by registered sellers at par with STRN, exempting the 3% further tax on supplies to unregistered buyers if CNIC numbers were provided in sales tax returns. For raw material purchases, VAT may be charged at 1.7% if the CNIC number of unregistered buyers is not provided.
KCCI suggested accepting sales tax invoices issued by sellers for goods sold to buyers across the country as valid documents for clearance purposes. It also recommended revising withholding tax (WHT) to 2% for the import of essential food items and making it equal for all importers, regardless of commercial or industrial status.
The chamber further proposed that withholding income tax at the import stage on raw materials should be treated as advance tax and be adjustable against actual liabilities. It advocated for phasing out the concept of minimum WHT on raw material imports and differentiating between importers of finished goods and raw materials to support the industry and promote documentation.
In terms of customs duty on reactive dyes, KCCI suggested rationalizing it to a maximum of 3% and abolishing the additional customs duty, considering the importance of reactive dyes as a basic raw material for the textile industry.
For polymers, the chamber recommended reducing customs duty to 2%, sales tax to 12%, and WHT to 1% for both industrial and commercial importers. It called for waiving the 3% value addition sales tax on commercial importers to ensure a level playing field.
In summary, the KCCI’s Federal Budget Proposals for 2023-24 underscore the need for unconventional measures to address the economic challenges faced by Pakistan. The chamber urges policymakers to adopt innovative approaches, considering the ground realities, to revitalize the economy and create a favorable business environment. These proposals aim to address issues related to forex reserves, imports, tax compliance, audit processes, and industry-specific concerns.