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CTA concerned over export-related problems

  1. Forbes fishing project is dead
  2. Kargil conflict and the economy
  3. CTA concerned over export related problems
  4. " Its time to do away with all direct taxes"

Suggests remedy for the battered economy

Special Correspondent, Islamabad
July 26 - August 1, 1999

In a very strong letter the Council of Textile Associations (CTA) has drawn the attention of the government towards the depleting exports and the attitude of concerned authorities towards the tax payers. Apart from pointing out the main obstacles towards a robust economy the Council has tried to suggest a remedy for the battered economy.

According to the Council, "No doubt it is a matter of satisfaction that London Club and Paris Club have rescheduled our debts but it should not be a matter of complacency towards exports, neither this postponement can be treated as an alternative for our foreign exchange earnings." The Government's fiscal policies as well as the Budget 1999-2000 are revenue-oriented. Nobody denies the importance of revenue but unfortunately, the concentration of tax collectors and policy makers is: "Tax the already Taxed." Feudal lords, parliamentarians, assembly members, senators and big tycoons are not in the tax net. Some of them may be paying but their contribution is just "Pea Nuts." Even in present circumstances when the country is facing a "Threat of War" which involves national security and existence of Pakistan, this affluent class is not opening their kitties. They even do not even bother to return loans they have obtained from banks. We fail to understand the apathy and selfish attitude of such people and God knows what they will do with their wealth if the country is doomed. The government has also miserably failed to impose tax judicially and according to Islamic Shariah, for which they want to pass a Bill in the Parliament. The government has no courage to collect any tax from those who flex their muscles. A big source of revenue is "privatization" which is going on snail's pace but the government has shown no concern for it.

On the export side, it is a pity that for the last five years since the exports are failing or are stagnant, no government minister or high official has been in a position to diagnose the cause for the same. Packages after packages have been announced to boost exports by the successive governments but the result has been zero.

According to the Council of Textile Associations, it is amazed that the most obvious reasons for the failure of exports are not considered by the government particularly the Ministry of Commerce. There is a need to reduce the cost of production under the present recessionary international conditions in order to make Pakistani goods competitive; simplifying the procedure of refund of indirect taxes and levies on exports such as sales tax, withholding tax, extraordinary heavy duties and taxes on utility bills, levies of tax by multiple central and provincial departments, excessive stamp duties and excise duties on raw materials and documents etc.

A simple solution of the above problems is: (a) least possible interference from the government in export business, like that prevalent at the moment on "import side"; (b) granting "export Processing Zone Status" for levy of labour, social security, EOBI etc on 75 per cent or more export oriented industries; (c) simple procedure of refund of the duties, levies and taxes on percentage basis on FOB value of the export goods.

The government, instead of paying cash, can issue refund vouchers, bearing reasonable interest rates; salable in stock exchange, banks or utilized for paying government dues of all sorts. This will reduce the liquidity crunch of the government as well as provide double check on refunds. The present system of refund of sales tax and other duties has failed. It has neither benefited the government as it should have, nor boosted the exports. Lastly, the game of ducks and drakes played by the State Bank of Pakistan with Dollar should end. It may be keeping the Dollar/Rupees parity low but has severely jolted the inflow of Foreign Exchange from the Expatriates and Investors.