Caretaker Federal Minister (FM) for Finance Dr. Shamshad Akhtar assured the Pakistan Business Council (PBC) that measures taken by the interim government to stem smuggling and close the gap between inter-bank and open market exchange rates would stabilize the economy.
In a two-and-a-half-hour meeting with Dr. Shamshad Akhter today, PBC appreciated the government’s courage on energy and fuel pricing to sustain the IMF Stand-By Agreement.
It however urged the FM to ensure that the next IMF program is more reform-centric in broadening the tax base and addresses the fundamental flaws in the energy sector. The council also welcomed the steps taken by the minister to strengthen governance and accountability in state-owned enterprises.
The meeting was attended by Malik Amjed Zubair Tiwana, Chairman FBR, and his team with whom the PBC shared its concerns at the disproportionate burden of taxes on the formal sector, disparity in tax rates between corporate and unincorporated businesses, levy of minimum tax on turnover during tax holiday period and on listed companies, high tax on salaried employees and U-turns on taxation of inter-corporate dividends.
The FM assured that a focused discussion on these issues will be organized with the FBR. She also shared plans to establish a Tax Policy Unit, independent of the FBR and to seek input from the Fiscal Affairs Department of the IMF on issues highlighted by the PBC.
PBC also urged the Finance Minister in her position as the Chair of the Cabinet Committee on Economic Revival to support competitive pricing of power for the industry to create more jobs, promote exports, reduce reliance on imports, increase tax revenue, and absorb surplus generation capacity, especially in the winter months.
To accomplish this, PBC advised expediting the south-to-north transmission projects to dispatch low-cost power, restructure IPP debt in tenor, and in the case of CPEC projects, also convert to G-to-G terms, reduce T&D and recovery losses of DISCOs and to convert the 3 imported coal projects to cheaper local Thar coal.
The Finance Minister assured that the government’s objective was to reduce tariffs. On exports, PBC recommended a “whole-of-government” approach to overcome fragmentation between ministries.
PBC also urged operationalizing the EXIM Bank, changes to allow adequate investment in brand building and in the acquisition of IT companies abroad, finding ways to wash export pricing clean of all taxes incurred in an extended supply chain, reconfiguring export incentives to target items with growing global demand and ensure that PSQCA and DRAP were fully functional for their certification roles.
The Finance Minister agreed that the best ambassadors of a country are existing investors and foreign investors derive confidence from local investors. PBC urged the focus of FDI on projects that lead to exports or reduction in imports, enhance food security, and bring new technology and know-how.
The PBC reiterated the importance of IMF support and the FM assured that the government was fully committed to delivering the conditionalities of the SBA while the FM welcomed PBC’s suggestions for a reform-centric program for the future.