The OICCI says it has identified “critical anomalies”

KARACHI: In a letter addressed to the FBR Anomalies Committee, the Foreign Investors Chamber of Commerce and Industry (OICCI) has highlighted critical anomalies in the Finance Bill 2024-25 which will have a significant impact on commercial and economic viability.

The letter draws attention to the proposed imposition of 2 per cent Additional Customs Duty (ACD) on 1,600 items/products from July 1, 2024, though this was not included in the Finance Bill 2024-25 but will be imposed by the federal government through an SRO to be issued by the FBR.

These raw materials are currently not produced in Pakistan and are imported without any customs duty to support the local manufacturing industry. The existing tariff structure for these items has been rationalized by the National Tariff Commission, in line with the National Tariff Policy, after a comprehensive review of the value chain over a period of several years.

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Experts believe that the 2 per cent ACD on these raw materials should not be imposed as it would lead to serious anomalies for all products across the entire value chain. Therefore, these additional customs duties will further increase the cost of production of the domestic industry and make operations unviable in an already challenging macroeconomic environment.

The OICCI letter also describes the proposed amendment relating to the prohibition of deduction of 25% of total sales promotion and advertising expenditure (Section 180) as highly arbitrary and subjective. Further, the removal of the zero-rated sales tax regime for branded milk and tea whiteners will have a double negative impact on branded milk processors as they will have to charge 18% GST on their sales and input taxes borne by the farms will also form part of their costs.

The business advocacy group stresses that the government must take steps to bring distributors, wholesalers and retailers into the tax net. The proposed amendment to collect an advance tax of 2 to 2.5 percent from these market players only shifts the burden of their non-compliance to existing businesses.

The proposal to deduct income tax on export earnings at a minimum tax rate, instead of the existing final rate, will result in 29 percent higher taxable income for exporters, 17 percent profit accounting or tax deducted from export earnings and a maximum rate. 10 percent super tax. Consequently, exporters, already under pressure from high energy costs, would lose their global competitiveness and a decline in exports would have a negative impact on foreign exchange reserves.

Further, the OICCI letter expresses concern that the proposed restoration of the Commissioner's powers to reject advance tax assessments may lead to unnecessary harassment of advance taxpayers, primarily from the organized business sector.

At the same time, the withdrawal of the powers of the Commissioner to issue withholding exemption certificates (Sections 153 and 159) will aggravate the already alarming situation regarding refund of PKR 94 billion.

Commercial Copyright Recorder, 2024