Removal of discrimination in taxes on raw material imports urged


KARACHI: Zakaria Usman, President, Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has urged the Chairman, Federal Board of Revenue (FBR), Tariq Bajwa, to do away with the discrimination in duties and taxes between commercial and industrial importers of raw material as the raw material is ultimately consumed by the industry – either small, medium or large scale- and causes corruption, creates distortion in promotion of tax culture and is prone to misuse,.

The FPCCI Chief, as an instance, referred to SRO 1125(I)/2011 and elaborated that a commercial importer of polyester filament yarn, a basic raw material for the domestic fabric industry, is additionally subject to Value Added Tax (VAT) @ 2% and withholding Income Tax @ 3% due to which his cost of import is @ 4.51% higher than that of industrial importer which is subject to value added tax (VAT) @ 0% and withholding income tax @ 1% only.

“This is a sufficient incentive and motivates the unscrupulous commercial importers to import the raw material under the guise of manufacturers thus rendering the genuine commercial importers uncompetitive besides, making the national exchequer to suffer from heavy losses as more than 70% of the domestic demand of Polyester Filament Yarn is met through imports”, he added.

The President of the FPCCI, Zakaria Usman appreciated the Prime Minster Mian Muhammad Nawaz Sharif for constituting a Committee to review the concessionary regime (SROs) under the Chairmanship of Ishaq Dar, Federal Finance Minister and disclosed that Pakistan, with its limited capacity is suffering huge amount on the above cost. He informed that according to findings of a study conducted by Ms Aisha Ghaus Pasha, “Aggregate tax expenditure being the cost of exemptions, concessions and erosions of the tax base in the federal tax system could reach Rs 450 Billion or so; which equals to 3 percent of the economy and over one third of revenues actually collected.” He therefore, proposed that exemptions/concessions other than for building nation’s infrastructure should be withdrawn.

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