Import substitution necessary to save foreign exchange reserves: FPCCI

KARACHI: A meeting of Federation of Pakistan Chambers of Commerce and Industry’s Advisory Council on Budget Proposals has said that import substitution industry is indispensable to save foreign exchange reserves.

The meeting comprising of senior businessmen, former tax officials, experts and practitioners, and leading economists held under the convenership of former President FPCCI Mr Zakaria Usman.

They suggested the government to focus on curtailing dollar erosion through establishment of imports substitution industry, enhance tax volume and collection of taxes through inclusion of new taxpayers in the tax net through persuasion instead of prosecution by offering them simplified tax scheme at reduced payable rates instead of first collecting the tax and then return it under various heads.

The proposals argued that the higher tax rate provides incentive for its evasion in connivance with the tax officials and encourages direct contact between a tax payer and a tax collector which is against the government policy as it encourages tax evasion and corruption.

During the second meeting of the FPCCI Budget Advisory Council, the participants discussed proposals to improve exports of Pakistan and promoting imports substitution industries to save precious foreign exchange.

The council recommended identifying reasons for low volume of Pakistan’s exports. They also discussed various proposals to curtail smuggling aspect and under invoicing, macro strategy proposals and industry-specific micro proposals.

The meeting showed concern on low industrial growth and productivity level resulted from massive exemptions, poor tax administration, low threshold, lack of transparency and enforcement due to which the government faces a massive challenge of achieving revenue targets. Core economic issues such as budget deficit, trade deficit, resource allocation, expenditures and governance issues were also discussed.

Mr Zakaria Usman informed that the proposals and recommendations have been prepared with a view to bring about tax reforms including suggestions to simplify the tax law and remove ambiguities in tax regulations, broaden the tax base and take effective measures for enhancing the tax base to its optimum potential to make Pakistan prosperous and debt-free.

He said micro proposals which have been prepared after giving due consideration to the suggestions received from our member trade bodies (Chambers of Commerce, and Associations of Trade and Industry) on harsh and irritant provisions of taxation law will be divided into three volumes (I) General Macro Policy Issues (II) Taxation Policy Issues on Direct Taxes; Sales Tax, Federal Excise Duty; and Customs and the Volume-III contains Industry Specific Issues/Proposals.

He informed that the FPCCI Budget Advisory Council would submit its proposal after a comprehensive dilation on the issues and hardships being confronted by the trade & industry.