Businessmen have demanded out-of-the-box solutions to Pakistan’s economic problems in the budget for 2021-22 to address the diverse challenges emerging due to the Covid-19 pandemic, which have severely hampered growth and boosted the undocumented economy of the country.

In a statement on Tuesday, the Karachi Chamber of Commerce and Industry (KCCI) demanded a shift from the usual budget template which was used every year and followed through multiple Statutory Regulatory Orders (SROs), amendments, rules, notifications and clarifications.

KCCI President Shariq Vohra pointed out that 3% value added tax on commercial import of raw material, which was removed in the Finance Act 2019, was re-imposed in Finance Act 2020.

Calling for an end to the value added tax, he highlighted that due to the levy, commercial importers did not add any value to the raw material and instead, they resorted to selling the merchandise in the same form as it was received.

“The rate of sales tax in the country, at 17%, is the highest in the region,” he said while voicing concern. “Such a high levy disincentivises documentation and compliance.”

He was of the view that high indirect taxes had supported smuggling, tax evasion, under-invoicing and misdeclaration of goods.

He demanded that sales tax should be restricted to single digit on all sectors in order to help reduce the cost of inputs, which would in turn reduce prices of consumer goods and exports.

KCCI Senior Vice President Saqib Goodluck said that the CNIC requirement for purchase of merchandise worth Rs100,000 and above had promoted cash economy and undocumented transactions. “The CNIC condition has caused the economy more damage than good,” he said.

According to him, the CNIC requirement should have been optional and treated as the sales tax registration number (STRN), if provided in return by a registered person.

The concept of treating withholding tax as the minimum tax on various sectors and registered persons had severely eroded credibility of the entire tax regime, he said.

The SVP stressed that withholding tax should be adjustable against the actual tax liability because converting it to the minimum tax was a hurdle in the way of compliance and forced many people to opt out of the tax regime.

In addition, 3% tax on sales to unregistered people should be removed, he said.

Published in The Express Tribune, March 31st, 2021.

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