Stop pleasing IMF by compromising exports: Iftikhar Sheikh
KARACHI: Keeping in view the perpetually intensifying hardships being suffered by small traders, industrialists, exporters, salaried class, daily wagers and many other segments due to harsh taxation measures, unbridled discretionary powers to FBR and unbearably high energy tariffs, President Karachi Chamber of Commerce & Industry (KCCI) Iftikhar Ahmed Sheikh vociferously appealed the government to revisit all the highly unjust taxation measures and bring down gas and electricity tariffs which were leading to descending exports, closure of small businesses as well as industries and subsequent retrenchment of employees, besides bringing a large number of small businesses and industries at the verge of bankruptcy.
“The alarming situation calls for extensive relief measures on war-footing basis to ensure that the wheels of industry continue to spin otherwise, our beloved country, which is already fighting hard for economic survival, would be plunged into the darkness of anarchy as the jobless and poor segment of society with empty stomachs will have no other choice but to come out on streets which would trigger a host of other issues and unmanageable challenges for the government”, warned Iftikhar Sheikh in a statement issued here on Friday.
While referring to his recent meetings and discussions with a large number of traders and industrialists who have been constantly complaining about the repercussions of all-time high cost of doing business, Iftikhar Sheikh said, “We have never seen so many complains, demotivation and depression in the history of Karachi Chamber as ever day, we hear someone looking forward to either shutting down his business or curtailing production activities and go for layoffs which is really disheartening and a matter of grave concerns as widespread closure of industries would only lead to further amplifying the economic crises.”
Terming the imposition of 2.5 percent advance income tax on unregistered retailers under the Finance Act, 2024 as yet another arm-twisting tactic, he said that this move would put entire fast-moving consumer goods (FMCG) sector into the role of withholding agents which must be immediately withdrawn. Around 60 to 70 percent of goods supplied by FMCG sector to the unregistered retailers have been returned back to the manufacturers in outright defiance of the government’s latest measures which, KCCI members complain, would raise cost of goods, plummet sales and give a devastating blow to demand.
He was of the view that small traders as well as industrialists were already battling hard for survival but they were getting totally hopeless with each passing day due to excessively high gas and electricity tariffs which have to be rationalized at any cost. “Although the lawmakers have been assuring from time to time to bring down the electricity tariffs but, instead of doing so, the electricity tariff stays at an unbearably high level of 18 cents/ kWh to date whereas fixed charges have also been enhanced to Rs1,250 while gas was being supplied at a whopping tariff of Rs3,000 per MMBtu”, he said while asking that how a business of small trader or even an industrialist would remain active at such a high cost mainly fueled by energy tariffs?
While referring to assurance given by Chief Executive K-Electric Moonis Alvi for visiting KCCI soon, President KCCI hoped that during the forthcoming meeting, Chief Executive K-Electric would take steps to resolve the problems being faced by small traders particularly the issue of enhanced load shedding being carried out in the underprivileged areas of Karachi during the ongoing scorching summer season. “We will request KE to set up a helpdesk at KCCI to facilitate small traders and also ask the utility service provider to act leniently and refrain from carrying out excessive load shedding as people are dying almost every day because of current heatwave in the city.”
He further said that the businesses were suffering badly and hardly able to reach breakeven due to skyrocketing inflation which has terribly eroded the purchasing power of consumers. “Under these circumstances, several types of businesses, which have reached at the verge of bankruptcy, are further being threatened thanks to unbridled discretionary powers conferred to FBR Officials”, he said while vowing to strongly oppose all such draconian and arm-twisting measures at all available platforms as these cannot be sustained.
President KCCI further stated that shifting exports from 1 percent turnover-based Final Tax Regime (FTR) to standard taxation at 29 percent of taxable profit was proving to be disastrous for the exports which would drastically go down by more than 50 percent, resulting in exerting more pressure on foreign exchange reserves. “Moreover, under Export Finance Scheme (EFS), local purchases have been subjected to imposition of Sales Tax which is going to create a more suffocating environment for exports.”
Referring to the hotchpotch situation created by controversial SRO350, he said that despite assurances, the issue stands unresolved to date, triggering a lot of anxiety amongst taxpayers who were unable to submit their Sales Tax Returns. “Even when the utility service providers are unable to file their sales tax returns, how other businesses would be able to comply with the impractical conditions in SRO350”, he said while urging the FBR to immediately revisit and rectify issues in SRO350.
He feared that further delay in receding SRO 350 would result in halting meat, seafood, fish, vegetables, fruits, sesame seeds and many other exports as the point from where the chain of exporting all these and many other products begins, there is no system of registration. In this scenario, it will be impossible for filers to submit details about registered persons for Sales Tax returns.
Iftikhar Sheikh further stated that although the interest rate has been reduced by 1.5 percent but it needs to be brought down further at par with competing countries where the interest rates hover around 7 to 8 percent. “We fully understand that there are IMF compulsions but the government will have to come up with relief measures in consultation with KCCI which were doable within the IMF program.”
He said that perturbed traders, industrialists and exporters were fed up of all the unfulfilled assurances and promises which was the basic reason why most of the industries have stopped Balancing, Modernization & Replacement (BMR) activities.
Referring to IMF’s 37-month Extended Fund Facility (EFF) Arrangement of about US$7 billion, he noted that this IMF arrangement clearly indicates that Pakistan would receive around US$2.3 billion per annum but due to IMF’s strict conditions, the country would lose more than US$4 billion of exports each year. “Is it a wise thing to sacrifice double of what was being received from the IMF”, he said.
While fervently appealing the government to stop pleasing the IMF by compromising the exports, President KCCI stressed that the government must look into the aspect of how much was actually being lost in terms of exports by fulfilling the IMF’s conditions. “If IMF’s compulsions are leading to closure of industries, then the government should seriously rethink all its existing strategies to save the country from further disaster.”
