LAHORE: The Lahore Chamber of Commerce and Industry (LCCI) has highlighted numerous measures in the federal budget 2024-25 for the next financial year that will affect exports, manufacturing, increase inflation and called for their revocation.
Some of the measures , it added, also run counter to efforts to document the economy, improve tax collection, expand manufacturing industry for exports and spur economic growth. It also opposes certain proposed changes in the tax laws, which would widen the trust chasm between the government and the business community of the country.
In a detailed representation sent to the Anomaly Committee Business, LCCI President Kashif Anwar has urged the authorities to withdraw its decision to apply the normal income tax regime on exporters, saying this change in the decades old tax regime will adversely impact competitiveness of our exports as the cost of doing business is already higher when compared to regional competitors.
“Hence, this proposal to remove exports from Final Tax Regime must be dropped from the Finance Bill 2024-25 to prevent further deterioration of trade deficit and resulting pressure on foreign exchange reserves,” he pleaded.
At present, the persons deriving income from exports have to pay 1pc tax on their export proceeds which is the final tax. The Finance Bill 2024-25 proposes a 1 pc Advance Tax on exporters and furthermore, the income from exports be subjected to normal rates with one percent tax collection on their export proceeds treated as minimum tax.
Likewise, he pointed out that the proposed flat 15 percent rate of tax on gains from the disposal of immovable property by filers regardless of the holding period and FED on commercial properties and first sale of residential properties at 5pc would hamper the growth of the construction and real estate sectors, which will have ripple effects on more than 40 other allied sectors, and adversely impact remittance flows. In the same way, the increase in the rate of FED on cement from Rs 2 per kg to Rs 3 per kg is also anticipated to increase construction costs, affecting both commercial and residential development.
The chamber is also critical of withdrawal of power to issue any type of exemption certificate from the Commissioners, saying this proposal will result in piling up of refunds and would squeeze the liquidity of businesses. “It should be reviewed especially in cases where income is exempt from tax or where there is a 100pc tax credit,” the LCCI president said.
He called for review of the proposed enhancement in reduced rate of sales tax from 15pc to 18pc on supplies made by the POS retailers dealing in leather and textile products as it is feared to lead to a decline in domestic demand and reduce profitability of both garment and leather industries, undermining efforts to document these important sectors. He also said the 3 pc incentive provided to POS-registered persons in certain sectors must be restored.
Kashif Anwar also criticised the increase in advance income tax to be collected from retailers from 0.5 pc to 2.25 pc, saying it will increase the cost for retailers and discourage documentation.
The chamber urged the government to withdraw the proposal to raise the Petroleum Development Levy from Rs 60 per litre to Rs 80 per litre since it would further burden the inflation stricken masses and stoke more inflation. The exorbitant hike in tax slabs for salaried individuals (up to 35 pc) and non-salaried individuals (up to 45 pc), the president said, will affect a significantly large segment of the population.
According to the LCCI, the Finance Bill 2024-25 proposes to revamp the definition of “tax fraud” by significantly expanding its scope. The explanation reverses the onus onto the registered taxpayer, imposing a harsh and cruel mechanism that will complicate business operations and potentially lead to widespread corruption without enhancing revenue.
Additionally, many irrelevant omissions have been categorized as tax fraud. Even minor issues, such as issuing a tax invoice in violation of rules, have been made offences, which is excessively harsh. “These omissions should not be termed as tax fraud. It is proposed that the original definition before the Finance Act 2024 be restored,” Anwar said.
American Dollar Exchange Rate