June 23 - 29, 2008

Institute of Cost and Management Accountants of Pakistan, Karachi Branch Council arranged a Post Budget Seminar at the spacious Kohinoor Hall of Regent Plaza on 18th of June. The chief guest Mr. Mohammad Abdullah Yousuf, Chairman Federal Board of Revenue could not grace the occasion owing to some pressing engagements. FBR was, however, represented by Usman Khalid Mirza, Member Direct Taxes, Israr Rauf, DG, RTO, Munir Qureshi, Chief Collector, South and S. Hammad Raza, Member ADRC. The event comprising two sessions started at 6.45 pm with the recitation of Holy Quraan followed by a welcome address by Mr. Tariq Hussain, Vice Chairman, Karachi Branch Council-ICMAP. Mr. Tariq termed the Budget "people friendly" with a focus on almost all segments of the society. He was of the view that the ambitious revenue target will require consistent efforts without giving way to political expedience. According to him, one per cent increase in GST will burden the lesser income groups.

In his opening remarks, Mr. Jawed Mansha, Chairman Karachi Branch Council-ICMAP told the audience that the country was passing through a difficult situation. Nevertheless, we, being an intelligent nation, were quite capable of braving such storms. After listing the basic issues, he spelled out what he expected the country to do. According to him the country needs: an independent commission of social scientists, professional development at working level, HR development at war footing basis, capacity building loan schemes, public private partnership, gradual development of strategies for fair distribution of wealth, value addition as mission, building team for crafting tools, development of harmony at all levels, justice for all, human right protection, global recognition and better investment ecology.

Dr. Mirza Ikhtiar Baig, Chairman and CEO, Baig Group of Cos and Group Head of Budget Committee FPCCI was the center of attraction. With his overt association with the PPP, one expected him to be a bit pro-government while giving his views on the budget, but his presentation was quite balanced. According to Dr. Baig, it was a common man's budget aimed at accommodating him to the maximum within the resource limitations. He said it was high time we focused on agriculture and took to yield enhancing measures. India, without jacking input cost, has been successful in increasing its cotton output from 18 million bales to 24 million bales. On the contrary, our cotton output has been sliding down. He said that nothing was done for the agriculture sector during the last 50 years or so. This year, at least we have taken a start and done something for this all important sector of economy. When asked by this scribe that why the land reforms and agriculture tax have become forgotten subjects, he replied that he was optimistic that these issues will be taken up gradually and the agri economy policy will take a major shift. He lamented that the industrial sector has been totally ignored. One per cent increase in GST will not only hurt the industry but will also increase inflation. Instead of broadening the tax base, they have burdened the existing tax payers. According to him, the budget, in general, was directionless. He welcomed the 2 per cent increase in National Savings Schemes maintaining that it will not only reduce government's SBP borrowings but will also improve our national savings' ratio to GDP which is quite low when compared to the required 18 per cent. Health and education sectors, according to him, appear directionless as allocations to these sectors are simply dismal. He was critical of unusually high import bill resulting in a record trade deficit. Last year, we imported $5 billion worth of mobiles besides incurring a huge amount on the import of cooking oil. He stressed the need to launch import substitution programs and indigenous cooking oil projects. He criticized the SBP interest rate hike policy as this will do little to affect inflation which in essence is imported, having resulted from international oil and food price hikes. It will only exacerbate the industrial problems by jacking the cost of production.

Mr. Abdul Qadir Memon, Chief Executive, A. Qadir & Co, Law Consultant and President, Karachi Tax Bar gave an account of revenue and relief measures. He was of the view that amnesty to the $6 billion informal sector should be plugged. Retailers and wholesalers constituting 19.2 per cent of GDP and other small businesses should be brought under the tax net.

Mr. Munir Qureshi, Chief Collector , South, FBR said that our tax to GDP ratio was lowest in the world. He stressed the need to develop human resource and encourage local manufacturing. He said that we have a habit of concealing facts. Our information system needs to be revamped with a focus on reliability.

Mr. Sher Afgan Malik, President, ICMAP termed the budget as excellent further maintaining that we need to live as a nation and honestly assess where do we stand. He said that our education and productivity levels are quite dismal. He was right when he said that we hardly make use of the input generated by the post budget analyses.

In his concluding remarks, the session-1 chairman, Syed Masoud Ahmed Naqvi, Senior Partner, T.H.K & Co discussed at length the salient features of the budget maintaining that at least some thought process appears to have gone into the making of budget document. He also elaborated on the difference in the perceptions of a common man and a businessman regarding economic development. Being an agro economy, he said, we should focus on agriculture. The difference in what we pay to the farmer and what the ultimate consumer has to pay is not value addition. It is a cruel sort of cost addition which, according to him, should be eliminated. A meager 1.5 per cent growth in agriculture sector is shameful. We also need to improve on the credibility of information which at present is not good. He pointed out some discrepancy in the GDP growth figure of Economic Survey for the year 2004-05.

Syed M. Shabbar Zaidi, President SAFA, Partner, A.F Fergusson, in his eloquent style told the audience that we can not live on trading alone. We must focus on manufacturing as well. He was of the view that budget targets can be achieved if the systems are not disturbed for political reasons. He said we have been working on Dubai philosophy which means trading, trading and trading. We don't need an 8 or 9 per cent growth with agriculture and manufacturing sectors going down. We need to understand our agriculture sector to take full advantage of its potential, he maintained. The emotional touch he gave to his assertions made him an obviously welcome speaker. He said we have spent $114 billion during the last 28 years thereby accumulating a huge trade deficit. Under-invoicing in imports has also been a serious recurring problem, he pointed out.

Since the chief guest Mr. M. Abdullah Yousuf, Chairman FBR could not make it to the event, Mr. Usman Khalid Mirza, Member, Direct Taxes, FBR gave a detailed presentation on the tax proposals explaining the logic and rationale behind each and every fiscal move. Since he had to leave earlier, he was not available for his comments in the question and answer session.

Dr. Qazi Masood, Head of Research and Associate Professor IBA, pointed out that the most of the budget analyses have failed to focus on the composition of growth. According to him, 40 per cent of the growth has come from retail and wholesale sectors alone which is not a good omen. The textile sector accounting for 67 per cent of the economy has shown a negative growth of one per cent. According to his estimate, the inflation at the end of the next fiscal year will be around 18 per cent.

In case you ever feel bothered by the expected impact of lengthy budgetary analyses on the poor audience, do not forget to put on your list speakers like Mr. Hanif Ismail, Director Strategic Development Getz Pharma (Pvt) Limited. The yawning audience glancing stealthily towards the dinner settings skirting the Kohinoor Hall, was taken by a pleasant surprise when Mr. Hanif presented the industry point of view in his humorous yet very effective style. Humor aside, his criticism of the budget was incisive and well-directed. Be it imposition of 35 per cent LC margin, increase in GST rate or jacking of bank borrowing cost, he properly connected every move to the resultant liquidity problem for the industry which in turn made the job of doing business yet more difficult. In his opinion it was cruel to bracket the commercial and industrial importers by putting them under a uniform 2 per cent withholding tax regime, as a commercial importer does not go through the pains of value addition in the typical industrial environment of this country. Criticizing the corporate wisdom of public sector, he disclosed that all foreign airlines had hedged the oil purchase at $52 up till June 2009, while PIA made to such preemptive move sustaining huge losses in consequence.

After a brief presentation by Mr. Hemani of KASB Direct, and the customary vote of thanks, the event concluded leaving the audience free to move to the dinner area.