ECONOMICS - TURNING THREATS INTO OPPORTUNITIES (Balance of Payment)

Balance of PaymentFirstly, it is really sad to state that role of EPB was an inactive body instead of a proactive body. EPB fails to identify the new exportable items and little has been done to promote cement etc. EPB fails to provide the exporter the data relating to competitive prices offered by neighboring countries and strategically making Pakistans export survive in competitive environment.
Secondly, custom department of the FBR was busy in merely unearthing the under invoicing and misapplication of correct duty rates instead of providing any data compiled after due brain storming session to identify imports of items which are already available in Pakistan, items which are luxurious in nature, etc. The core reason is that either there is no such department or if there is then they are not effectively trained on this count. Such a process of analysis could easily be undertaken after the computerization that has not been used effectively in the past.
Thirdly, the non-alignment of import, export and trade policy was another core reason. Fourthly, the speculation gain (Capital Gain) exemption even to non-residents has seriously affected the foreign currency reserves.
Last but not least, imported trading items are taxed at 2% Income Tax while locally manufactured items are taxed at 3.5%. Further, commercial importer is not only immune from Sales and Income Tax Audit but by implication from record keeping. What a pity! Further, it is imperative that unnecessary imports be reduced next to zero while the commercial imported trading items be brought under normal tax regime from final tax regime under Income Tax Ordinance, 2001 and Sales Tax Act, 1990.
These measures would not only help us in promoting local manufacturing but would also help us in reducing the gap of balance of payments. EPB should be re-organized for a pro-active role while an analysis wing of the custom department be set up which will ultimately help in formulating a policy. The policies of individual ministries and organization need to be aligned with overall objective, that is, monetary and fiscal policy at the cost of individual heuristic approach.

Article courtesy of Muhammad Ashraf