Govt urged to discourage illegal businesses, provide relief to taxpayers

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Tobacco manufacturing

ISLAMABAD: Various taxpaying industries that are contributing towards the government’s Covid-19 Relief Fund have urged the government to discourage smuggling and illegal businesses, which are fuelling parallel economy in the country.

Sources in the Ministry of Industries (MoI) said major registered and taxpaying firms had requested the government to take practical steps against those running illegal businesses in the country.

On one hand, many organisations have stepped forward to donate in the corona relief fund on the call of Prime Minister Imran Khan, but on the other, illegal businesses flourishing and not paying taxes, sources quoted multiple industries as having conveyed to the government.

“If we take a look at the highest tax-paying industries, the legitimate tobacco industry of Pakistan is definitely in top rankings. Unfortunately, this tax is only being paid by 60pc of the tobacco industry, whereas 40pc of the industry is evading taxes. This 40pc comprises local manufacturers who are not only evading taxes by showing less production and under invoicing, but also selling cigarettes on lower prices, which is yet another breach of the law of the land. This is causing an annual Rs40-45 billion loss to the local economy,” the tobacco industry said in a statement.

In another statement, the tyre industry has also informed that illegal trade is costing Pakistan a loss of approximately Rs30 billion annually.

According to a data provided by a local tyre manufacturer, in 2017-18 the national exchequer incurred a loss of Rs30 billion (at the current rate of duty) because of tyre smuggling.

Similarly, the petroleum industry, due to the smuggling of Iranian oil, has been causing an annual loss of Rs60 billion to the national exchequer every year. This smuggling reportedly takes place through the Pak-Iran border in Balochistan and is in circulation, hurting the legitimate oil and gas sector.

As per documents shared with the Senate’s Standing Committee on Petroleum, the Pakistan State Oil (PSO) had to shut 159 petrol outlets down in Balochistan where Iranian petrol is freely available at fuel stations and it is cheaper by Rs10 to Rs20 per litre.

Instead of curbing illegal businesses, the governments have been burdening already tax-paying industries by increasing ratios of taxes. Increasing taxes on the legitimate businesses further poses a threat to the economy as businesses will suffer even more, threatening the contribution towards the national exchequer.

During this time of crisis if the government is able to restrict the illegal trade in the country by taking strict measures such as the track and trace system and encourage legitimate businesses to maximise productivity by putting reasonable taxes on them, the economy can get better.

If illegal trade is controlled, the government would have more than Rs130 billion rupees, which can be used to get through this period of crisis.

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