The Federation of Pakistan Chambers of Commerce & Industry’s Businessmen Panel has sought a reduction in the tax ratio on petroleum products to facilitate trade and industry, as the government has been charging petroleum levies and several other taxes on oil products to a record-high level.
FPCCI former president and BMP Chairman Mian Anjum Nisar said that the government is unable to pass on the full benefit of oil prices drop in the global market to the local consumers because of high taxation, as the maximum petroleum levy on petroleum products has now reached Rs80 per litre which is not justified.
Mian Anjum Nisar observed that the government has already increased the general sales tax on all petroleum products to a standard rate across the board to generate additional revenues.
He said that the Brent crude rates, during the last six months period dropped to the lowest level, but the authorities, instead of providing full relief of the massive fall in oil rates to the public further escalated the prices of petroleum levy on petrol by another 26% to the highest level along with the GST. Besides the sales tax, the government lifted the rate of petroleum levy on HSD and petrol by around 400%, during the last almost one and half years.
He called for passing on the full relief of cut in petroleum products in the international market to the local consumers for the month of Sept, instead of taking any kind of adjustment in taxes, as the inflation is going up due to continuous jumps in oil prices.
He observed that business-friendly policies should be adopted as other neighbouring countries of the region are giving to trade and industry. He said that a sizeable cut in oil rates would certainly bring down the cost of doing business and our products would get their due share in the global market.
He said that this target represents a significant increase of Rs 321 billion from the revised estimate of Rs 960 billion for the current fiscal year 2024-25.
He said that at a time when the country’s GDP ratio was further stretched owing to slow export growth amidst the high cost of doing business, the trade and industry needed maximum relief.
He said that Pakistan’s economy is going through a challenging phase. With a view to improve the cash flow of businesses at this crucial time, the government will have to facilitate the business community through a reduction in tax ratio on all items including the oil products, besides deferring the interest payments of the businesses for at least one year.
He called upon the government to address the key issues of trade and industry, facilitate economic growth along with improving tax revenue of the government. He said that the impact of unrest has badly affected the business and industrial sectors, stressing the government to bring down GST to ease the difficulties of businesses.
Mian Anjum Nisar said that the move would reduce the cost of doing business, attract new investment, promote industrialization and create new jobs.
The BMP leader said that the government has made an unprecedented increase in the ratio of tax, duty and Petroleum Levi ostensibly to earn billions of rupees in revenue. By jacking up the ratio of taxes, duties and PLs, the government has deprived the consumers of relief from the plunge in global oil prices.
He said that instead of hiking the power tariffs, the government should focus on controlling the transmission and distribution losses and power theft besides improving the performance of power companies to save the consumers from further burden.
He was of the view that the government could mobilize the required resources by increasing the number of taxpayers, reducing line losses and power theft, and ending exemptions to narrow the fiscal deficit instead of increasing the power tariff.
He said the last increase in power tariff left the industrial sector, particularly the export industry like textile, uncompetitive in comparison to regional competitors. This may lead to the loss of more export orders and render many more people jobless.
Despite the tariff surge, he said, power companies would not be able to recover the targeted revenue loss of around 28-30%. At the same time, it will force many consumers to stop paying their bills, which have become unbearable. He asked the government to undertake fundamental reforms in the power sector to make electricity affordable. Besides, the government should launch a crackdown on habitual power bill defaulters by putting them behind bars.
He said that the prices of petroleum products on the Platts index have dropped drastically and also the rupee has strengthened versus the dollar.
He said that petrol is mainly used in motorbikes and cars and is an alternative to compressed natural gas (CNG), especially in Punjab, where locally produced gas is not available at CNG filling stations.
HSD is primarily used in agriculture and transport sectors and any reduction in its price may have a positive impact on inflation.
Kerosene oil is used for cooking purposes in remote areas like northern parts of the country. Pakistan Army is a major consumer of kerosene oil.