Overseas investors and local stakeholders have expressed concern over amendments to the Income Tax Ordinance, citing that the changes will discourage potential businessmen from pouring capital into Pakistan.
In a letter written to Minister of Finance Abdul Hafeez Shaikh, Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General Abdul Aleem voiced concern over the draft of Second Amendment to the Income Tax Ordinance.
“Abrupt and frequent changes in laws damage the confidence of investors, particularly the foreign investors,” he said. Aleem stressed that the changes without proactive engagement with the key stakeholders, like business chambers, should be avoided.
He welcomed the move to rectify anomalies through proposed legislation as it would reduce distortion in the existing tax framework.
However, the increase in tax collection after the withdrawal of exemptions would be insignificant compared to the potential dent that it may have on the confidence of foreign investors in Pakistan, Aleem said.
“The corporate sector is already taxed heavily while other businesses in the informal economy hardly pay any taxes,” he said. “If the proposed amendments are approved, the burden on existing taxpayers will mount further.”
Keeping the potential costs in view, he requested the authorities to review the withdrawal of exemptions being contemplated and restrict the proposed amendments to just addressing anomalies in the income tax laws in order to avoid sending negative signals to the foreign investors.
In a separate letter, Pakistan Business Council CEO Ehsan Malik requested the government to halt the proposed removal of Clause B103C of Part-I of the Second Schedule of Income Tax Ordinance 2001.
“In a highly competitive global economy, one of the major determinants of success is the size of an entity,” he wrote. “It allows companies to compete on scale, product sophistication and innovation by allowing them to attract financial and human capital.”
In a bid to uplift Pakistani entities to enable them to compete both in the global and local markets, the Finance Act 2007 brought the concept of holding companies, he recalled.
Malik added that following the unveiling of Finance Act 2007, changes were made in tax laws by introducing Section 59AA, which was related to group taxation, and Section 58B, which dealt with group relief.
Published in The Express Tribune, March 26th, 2021.
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