Foreign investors find budget short on tax broadening steps

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The Overseas Investors Chamber of Commerce and Industry (OICCI) has praised the 2014 budget proposals announced on Tuesday.

“The government plan for 2014-15 to reduce the fiscal deficit to below 5 percent, increase the tax collection by 24 percent and increase the PSDP by 25 percent is commendable,” commented Asad Jafar, President OICCI.

“Moreover, tangible incentives proposed in the upcoming budget especially to the textile sector and new FDI in manufacturing and construction industries is seen by OICCI as a credible effort by the government to revive economic growth together with ongoing fiscal consolidation. However, the proposed economic goals are largely dependent upon robust effort to deliver on targeted tax collection of Rs 2.8 trillion which is challenging but can only be achieved with determined effort on enforcement, accountability and good governance,” he added.

Overall, the budget proposals appear business friendly and OICCI supports the 3 year Fiscal Policy parameters announced by the Minister of Finance which include raising the Tax to GDP ratio by 1 percent annually to a target of 13 percent by 2016-17 together with investment to GDP ratio of 20 percent.

The focus on increasing the level of direct taxation is also in the right direction together with new measures to boost tax collection and broaden the tax base and increase taxes and cost of doing business for the tax evaders.

Considering the large size of the undocumented economy, the measures announced in the budget are positive but cover only a small portion of the informal sector in the country.

OICCI sincerely hopes that the announced measures will be implemented without compromise or favour.