Business community in Pakistan opposes imposition of wealth tax

Karachi, April 18, 2011 (PPI): The country’s business community has strongly opposed imposition of wealth tax and suggested the government to take them on board before taking any decision on new taxes in the upcoming federal budget.

Speaking at a reception in honour of business community leader S. M. Munir, organized by Pakistan Pharmaceutical Manufacturers’ Association (PPMA) at a local hotel on Sunday evening, they warned that the business community will launch country-wide protest if wealth tax is imposed.

President India-Pakistan Chamber of Commerce and Industry and leader of business community S. M. Munir said that the wealth tax should not be imposed as its imposition will cause outflow of capital from the country. He said there is no country having imposed wealth tax in the world. He suggested that the Prime Minister, Finance Minister and other higher authorities should consult business community before the upcoming budget.

He expressed serious concerns over the huge losses being faced by the public sector entities including Pakistan Railways, PIA, Steel Mills and others and proposed these institutions should be given to private sector. He advocated the construction of more dams to overcome the serious issue of shortage of power and water in the country. He opposed the proposal of two weekly holidays in the country and said the power shortage and strikes have already affected industrial production while the two weekly holidays would further affect the industrial output.

He suggested that if the government implement two weekly holidays it should be only in government departments. The banks should be exempted from two weekly holidays so that industrial activities could be continued. He pointed out that a single day strike caused a loss of around Rs.5-6 billion and more holidays will further affect industrial production.

Speaking on the occasion, Israr Rauf, Member Tax FBR assured the business community that they would be consulted over the imposition of new taxes in the upcoming federal budget. He pointed out that the tax-to-GDP ratio of 9.1 percent in Pakistan is the lowest in the region and there is a need to increase it at appropriate level. The FBR has planned to increase tax-to-GDP ratio to 9.5 percent by 2012. Eventually the tax-to-GDP ratio would be increased to 12-13 percent by 2014 he added and asked the business community to support the government to achieve this target.

He asked the pharmaceutical and other sectors to send their budget proposals to FBR so that they could be considered for the upcoming federal budget. He said that five export oriented sectors have been declared zero rated which is a big breakthrough for the industrial sector.

Sindh Health Minister Dr. Saghir Ahmed said instead of increasing taxes on existing tax payers the government should bring other sectors including agriculture income under tax net to generate more revenues.

Tariq Saeed said the business community will not accept imposition of wealth tax at any cost and a country-wide protest will be launched if the government tried to impose it. He also expressed his serious concerns over the huge losses being faced by the public sector entities and said that the private sector can help the government for bringing out these entities from losses.

He also suggested that the government should hand over these loss making entities to the private sector.

Senator Abdul Haseeb Khan also suggested that the machinery and raw material for pharmaceutical sector should be tax exempted. He also advocated for zero rates tax for the pharmaceutical sector.

Haroon Qasim, Chairman PPMA said on this occasion that the country’s pharmaceutical sector is catering to about 90 percent of the requirements of the country through local manufacturing. He pointed out that exports of pharmaceutical products have grown by 30 percent to $164 million, being exported to over 60 countries across the continent. He said that the county’s pharmaceutical industry has capability to increase its exports to $1 billion mark. He said PPMA has strongly recommended to the ministry of health to form a Drug Regulatory Authority so that the exports can grow at a rapid pace. He said the pharmaceutical sector is under severe pressure in the current economic scenario due to consistent depreciation of the currency and no price increase since 2001 given by the ministry of health.

He suggested that the pharmaceutical products should be made zero rates to be able to claim input tax adjustment, or the supplies and services to pharmaceutical sector should be zero rates. “Strangely enough when pharmaceutical industry imports raw materials and packaging material, some of the items attract 17 percent sales tax; whereas finished import of pharmaceutical is allowed with zero rates meaning we are encouraging imports of pharmaceutical and discouraging local manufacturing”, he said. He also gave various budget proposals and said PPMA hopes these submissions will be taken into account by FBR while finalizing the 2011-12 budget. ”It is important the pharmaceutical industry is given full government support as it is a second defence line of the country in the event of war, natural disaster or epidemics”, he added.

Former KATI president Mian Zahid Hussain and PPMA Sindh chapter chairman Dr Qaiser Waheed also spoke on this occasion and talked about issues being faced by the country’s industrial sector. A large number of PPMA members and businessmen attended the event. The birthday cake cutting ceremony was also held.