New taxes imposition on poultry in 2016-17 budget

Remember the poor?

Presently, one of the major ingredients of feed, soybean meal, is not being produced in Pakistan and therefore the poultry sector fulfills its requirement by importing it

The purpose of this document is to draw general public attention towards the recent imposition of taxes and to address the government to withdraw newly imposed taxes on the poultry sector in the 2016-17 budget. Finance Minister Ishaq Dar stated in the budget speech that the concession of customs duty and sales taxes on major poultry components shall remain in place but the ratio of sales tax on major ingredients of poultry feed has been increased by 5-10pc.
Presently, one of the major ingredients of feed, soybean meal, is not being produced in Pakistan and therefore the poultry sector fulfills its requirement by importing it. In the budget 2014-15 the government introduced 5pc import duty and 5pc sales tax. Resultantly, this has increased the cost of production of poultry products tremendously and now in the recent budget, the government is also carrying it out in practice. Soybean meal is a very rich source of vegetable protein and is being used as an essential poultry feed ingredient.
The second key point is the tax on the import of grandparent chicks. The industry was seeking exemption from regulatory duty on the import of grandparent chicks because the entire edifice of the chicken production is dependent upon this very small number of grandparents that are being imported. The grandparent stock is the basic seed (raw material) for the production of poultry products (parents stock, broilers and chicken meat, etc). At present it is not being produced locally and is being imported.
Earlier the import duty was 5pc. However, now there is 5pc import duty plus 10pc regulatory duty total being 15pc. It leads to parent stocks and parent stocks further produce a day old chicks. They subsequently produce broilers which are consumed by all classes of consumers. Also there are only three genetic companies in the world, which produce these and sell them at a very high price ranging from $25-30/chick for production of parent stock females and males.

Similarly another notable concern is the levy of 30pc regulatory duty on import of corn, and almost 70pc consumption is based on locally produced corn which is considered the major ingredient in feed making.

On the import of machinery and plants, taxes include 5pc import duty plus 10pc sales tax plus 1pc additional duty, making the total 16pc.
Other expenses include additional levies, clearance expense and transportation from seaport to Punjab added up 30-35pc inland freight expense.
· Government charges 16pc sales tax on electric bills under sec 3(1) 1990

· Withholding tax 10pc 235(4) (A) income tax ordinance 2001 that increases the cost of production

· For two years, government has been charging 8pc sales tax on import of poultry feed additives

Conclusion

This extra burden of taxes is the initiative towards demolishing the industry and paving the way for heavy inflation. Presently 10pc customs duty and 10pc sales tax on soybean meal have already raised the cost. Hence an additional increase in sales tax on soybean meal and additives as stated 5-10pc in budget of 2016-17 will destroy the whole industry. If the industry passes these additional cost and taxes directly to the consumers, this will affect badly the purchasing power of poultry products. On the other hand, obviously it is not possible for the industry to absorb this cost itself because they are already fighting for survival owing to ever increasing cost of production.
It is recorded that despite high consumption of protein in the US, it is still providing subsidy of over one billion dollars per day. Comparatively poor countries, like Thailand, are also providing substantial support to the poultry field. As we know that poultry is the only cheapest alternative way available to get meat protein for the large population of the country, it is understood that it covers the immense need of meat in comparison to mutton and beef.
Thus, the poultry sector was hopeful to get exemption from the government for further taxes by addressing the general public routine need of consumption. After the imposition of new taxes poultry products would be far away from the approach of laymen. So, it is strongly appealed to the government to withdraw the customs duty and sales tax on soybean import or announce the subsidy to keep the cheapest source of vitamin and protein in the range of the poor.