Macroeconomic stability must before taking growth-oriented steps: Aurangzeb

KARACHI: Federal Minister for Finance & Revenue Muhammad Aurangzeb has said that efforts were being made to attain macroeconomic stability for sustainable growth because if the government, without attaining macroeconomic stability, takes growth-oriented steps which was done in the past, it would face balance of payment issue so there was no choice but to take difficult decisions for macroeconomic stability which, when achieved, would reduce the burden on business community as well as salaried class.
Speaking at a meeting during his visit to the Karachi Chamber of Commerce & Industry (KCCI) on Tuesday, the Finance Minister said that the economy faces structural issues as whenever attempts were made to accelerate growth, it caused balance of payment problem. “It is a fundamental issue and we have to get out of it. We can only go for growth when we have enough fiscal space which should be export-led. In this regard, the business community, exporters and the value-added sector have to play a role.”
Federal Minister for Ports & Shipping Qaiser Ahmed Sheikh, Minister of State for Finance, Revenue & Power Ali Pervez Malik, Chairman Federal Board of Revenue Malik Amjed Zubair Tiwana, Chairman Businessmen Group Zubair Motiwala, Vice Chairmen BMG Haroon Farooki, Anjum Nisar and Jawed Bilwani, President KCCI Iftikhar Ahmed Sheikh, Senior Vice President Altaf A. Ghaffar, Vice President Tanveer Ahmed Barry, KCCI Managing Committee Members, Former Presidents and others were also present on the occasion.
Finance Minister Muhammad Aurangzeb further stated that enhanced taxes particularly for salaried class were a short-term measure but definitely not something easy. “We raised taxes for business community and salaried class this year but we cannot do it again and again as they all are excessively overburdened, therefore, all other untaxed sectors including retailers, agriculture, real estate sectors etc. have to be brought into the tax net to reduce burden on existing taxpayers”, he added while appreciating all the Chief Ministers for agreeing to bring in legislations for taxing the agricultural sector which was currently a provincial subject. “We are at the end of the road as we cannot continue to raise taxes for business community and salaried class, hence, we have to bring the untaxed sectors into the economy and ensure effective enforcement of taxation laws.”
Commenting on State Bank’s decision to cut interest rate by 1 percent, he said that it was a step in the right direction and keeping in view the inflation, even if it goes up to some extent, the SBP will still have enough room to gradually bring down the interest rate further. “In addition to high interest rates, the business community suffers badly due to high taxes and energy tariffs which have all come together but the government was cognizant of all these issues. The business community rightly demands competitive energy tariffs but relief can only be provided according to available fiscal space”, he added.
He stressed that if Pakistan can achieve agriculture exports of US$8 billion and IT exports of US$3.2 billion then the relevant businessmen must look forward to achieving agricultural exports of US$10 billion and IT exports of US$5 billion.
Referring to his discussions with banks, the Finance Minister said that banks have been advised to give maximum lending to private sector, particularly the farmers and SMEs who have to lead the country. Credit has to be provided to private sector on cashflow basis, not on collateral basis which was being done by several banks whereas the other banks must also do the same.
He further informed that all determined tax refunds up to June 30, 2024 summing up to a total of Rs51 billion were released to the industries on July 1, 2024 and if duty drawbacks were also included, the overall refunds would go up to US$70 billion. “If we hold these refunds, these raise liquidity cost for industries as they acquire working capital at the rate of around 20 percent that is an addition to cost of doing business”, he said and assured that under clear guidance by Prime Minister, the government will not hold refunds for 8 to 10 months but these will be released immediately after determination.
Commenting on misconception about numerous free-of-cost facilities being provided to Ministers, he said, “I want to make a very categorical statement that I don’t take salary and I along with all the Ministers present at KCCI today pay our bills from our own pockets. At least at the federal level, we have to reduce our expenditures.”
He said that during Imran Khan’s government, Dr. Ishrat Hussain presented a report on how to right-size the government but unfortunately that report, which was a very good effort, never saw light of the day. The right-sizing committee, under PM’s supervision, was reviewing the expenditures of all the ministries and entities which would be gradually devolved or merged under an effective implementation plan to be announced by the Prime Minister.
Federal Minister for Maritime Affairs Qaiser Ahmed Sheikh, in his remarks, advised the Finance Minister to maintain good liaison and interaction with KCCI which would certainly prove favorable for the economy as it was this Chamber, which represents the biggest city of the country that contributes matchlessly to the economy. “The business community of Karachi is capable of delivering and coming up to the expectations of the government”, he added.
Minister of State for Finance, Revenue and Power Ali Pervez Malik stated that the government has created a new path to attain macroeconomic stability which, although has created challenges for everyone including the business community and also common man, but this approach has resolved several problems which can be gauged from currency stability, availability of foreign exchange for issuance of LCs and improved performance of stock market in addition to improved rating of Pakistan by international rating agencies.
In response to hardships being faced by business community due to SRO350, Chairman FBR Malik Amjed Zubair Tiwana informed that FBR postponed implementation of biometric verification requirements until August 31, 2024.
Delivering his presentation, Chairman BMG Zubair Motiwala, while highlighting the issues in controversial SRO350, pointed out that Businesses were concerned over provisional status due to non-filing by manufacturers. Although FBR claimed these returns will not be held provisional, however, it was not effectively implemented. Moreover, invoices were automatically removed from buyer records if sellers do not file returns, reducing both reported purchases and input tax credits.
He suggested that before introducing new measures in the taxation system, the business community and tax experts should be consulted as in the case of SRO 350, in spite of rectifying it three times, the problem has not been completely resolved. “Overnight issuance of SROs creates huge problems and no SRO should be issued without consultation process of business community.”
Commenting on the decision to move exporters from Final tax Regime to Normal Tax Regime, Zubair Motiwala stressed the need to retain FTR for exporters to ensure a transparent and beneficial taxation system which would help preserve the competitiveness of Pakistan’s export sector. “As Prime Minister and Finance Minister have always advocated for minimum contact between tax payers and tax collectors, however, implementation of NTR on exporters contradicts this desire and vision”, he opined, adding that today exports have become very competitive and for this reason, export performance stays stagnant so any imposition of the super tax would further make the exporters uncompetitive.
Referring to the decision to introduce investigative audit, he said that this step was unwarranted as a system of real-time audit already exists. “We feel that if there are any shortcomings in this system then same may be updated accordingly. This is also against Finance Minister’s resolve to eliminate human interaction with tax authorities.”
Highlighting other anomalies, Zubair Motiwala sought Finance Minister’s assistance in dealing issues faced by commercial importers of yarn and plastic who were subjected to exorbitantly high taxes and duties whereas the government decision to impose sales tax on education stationery and milk also needs to reviewed.
Earlier, President KCCI Iftikhar Ahmed Sheikh, while welcoming the Ministers and Chairman FBR, stated that the core issues highlighted by the largest chamber of country must get due attention of the federal government as all these issues highlighted by KCCI were having a terrible impact on businesses and the economy. “We are constantly requesting the government to rectify these issues purely in the larger interest of the country”, he added.
Keeping in view the immense experience of Finance Minister, President KCCI was fairly optimistic that he will be able to steer the country out of ongoing economic crises. “All the efforts and initiatives taken by the government for creating an enabling business environment will be fully supported by KCCI.”