Business leaders ask govt to revisit harsh budgetary measures

KARACHI: While appreciating Prime Minister Shehbaz Sharif’s decision to cut the electricity rate by Rs10.69 per unit for the industrial sector, the trade and industry leaders continued to criticise the budgetary measures announced for the fiscal year 2024-25.

Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh acknowledged the government’s efforts in formulating a comprehensive budget under challenging economic conditions. He, however, said some specific provisions in the Finance Bill 2024 may negatively impact exporters.

In a letter to the PM, the FPCCI chief said the shift from a fixed one per cent withholding income tax to the standard tax regime for exporters introduces complexities that may deter especially small and medium enterprises (SMEs) due to increased bureaucratic engagements with the Federal Board of Revenue.

The proposed withdrawal of sales tax exemptions on local supplies to registered exporters could destabilise the supply chain, while the introduction of severe non-bailable penalties for suspected tax fraud raises concerns over potential misuse leading to unwarranted harassment and deterring investment, he said.

Say meagre tariff cut not enough for economic revival

Karachi Chamber of Commerce and Industry (KCCI) President Iftikhar Ahmed Sheikh said the power tariff cut would at least provide SMEs with breathing space for survival.

He demanded that gas prices be brought to regionally competitive levels, as the prime minister had promised, to help bring down the cost of doing business and the cost of manufacturing to an international level.

However, he drew the prime minister’s attention to K-Electric’s 300pc increase in the fixed charges from Rs460 to Rs2,000, which requires the government’s immediate intervention; otherwise, the tariff cut relief would fade away.

Korangi Association of Trade and Industry (KATI) Johar Qandhari said the lower tariff would significantly relieve industrialists and exporters. However, he expressed concerns that a Rs5 hike in electricity rates by Nepra diminishes the overall benefit to just Rs5 per unit.

He highlighted that while the government’s initial reduction was estimated to provide Rs200bn in relief to the industrial sector, the subsequent Nepra adjustment has halved this benefit. He urged the government to implement more comprehensive measures to genuinely reduce production costs, enhancing the competitiveness of Pakistani products in global markets.

KCCI President Iftikhar Ahmed Sheikh said the budget appears to have been prepared using the standard IMF template, disappointing both the business community and the working classes of Pakistan. Obviously, the limited fiscal space and debt obligations left little room for the Finance Ministry and FBR to come up with significant relief for trade and industry in particular and the public in general.

He said the tax rate for salaried individuals remains capped at 35pc, whereas non-salaried individuals, non-corporate sector, SMEs and AOPs will see an increase from 35pc to 45pc. “This introduces a horizontal inequity, as it places a disproportionate tax burden on non-salaried individuals compared to their salaried counterparts”, KCCI chief added.

He said the increase in FED from Rs2 per kg to Rs3 per kg on cement is likely to impact the growth of the construction industry negatively and may lead to higher construction costs, affecting both commercial and residential development.

Elevating the general sales tax from 15pc to 18pc for Tier-I retailers in the textile and leather sectors could exacerbate the miseries of struggling industry, particularly as the textile sector has already seen a contraction of 8.3pc. This could lead to a decline in domestic demand and reduce the profitability of both garment and leather industries, he feared.

Mr Iftikhar urged the government to revisit the budgetary measures announced in the Finance Bill and remove the anomalies and certain harsh measures that are likely to negatively impact the business environment, exports, and GDP growth.