This will add jobs, enhance exports, and strengthen “Make-in-P | Regulatory Updates Of Pakistan
This will add jobs, enhance exports, and strengthen “Make-in-Pakistan.” The cost of the interest subsidy will more than be covered by additional tax revenues. At least retaining a version of TERF should be considered for medium sized businesses. Beyond the immediate timeframe, SME and longer-term lending can be taken over by properly configured and resourced development finance institutions which need to be established.
It said that the current fiscal policy discourages incorporation of businesses by levying tax on dividends and subjecting gains on sale of shares to CGT, irrespective of the holding period. Unincorporated businesses escape both these taxes. Manufacturers suffer from taxation at each stage of the value-chain whilst commercial importers benefit from presumptive tax at the import stage. Minimum tax based on turnover, besides being inequitable, also acts as a barrier to entry of new players by increasing the capital investment required to fund the tax liability until their businesses become profitable. Incentives hitherto available to motivate business with the formal sector have been removed.
The PBC urged a comparative study of the fiscal policy affecting corporatization and the manufacturing sector.
The rate at which import tariffs on raw and intermediate industrial inputs is being reduced could be accelerated to promote domestic manufacturing.
Food shortages and inflation risk hunger, unrest and law and order stability. Higher cost of food also reduces discretionary spending, lowering demand, a critical driver of growth. The government should walk the talk on “agriculture emergency,” especially on wheat and cotton. These have the greatest impact on hunger, jobs, and exports.
Impeding investment, cost, and ease of doing business are colonial-era, complex, time consuming, paper-based, and personal interaction-reliant bureaucratic processes. Fragmentation between the federal and provincial authorities has further made doing business more complex – taxation and unharmonized food standards are just two examples. We are encouraged by the government’s resolve under the Pakistan Regulatory Modernization Initiative (PRMI) and Civil Service Reforms to address the regulatory environment. The recent move to unify reporting of federal and provincial GST on a common portal and the Single Window initiative to speed up clearance of consignments portend well for the economy. The Raast and Roshan digital initiatives undertaken by the SBP also hold potential to promote financial inclusivity, visibility, speed, and cost of transactions. The lessons on digital “Know-Your-Customer” can be emulated in the wider economy – in opening of bank and broker accounts, for instance. Supplemented by fiscal incentives, digital transactions would also help broaden the tax base.
The continued bleeding of revenue by State-Owned Enterprises (SOEs) remains a lingering concern. This depletes the amount that the government can invest in socio-economic development. Several attempts to restructure and dispose SOEs have failed. Impeding this process are: PPRA regulations, public sector recruitment rules and fear of action by the National Accountability Bureau (NAB). These and other factors that thwarted the success of Sarmaya-e-Pakistan need to be addressed to arrest the bleeding of SOEs.
Reform of the NAB law is necessary to address the near paralysis of decision making by the bureaucracy. Two examples, from just the critical energy sector are delay in settlement of amounts due to IPPs and decisions affecting K-Electric.
Source: PakRevenue
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