Labour and Industrialists both recognize that industry is a ship, carrying all, which should not be scuttled. The present government was assumed to be pro-industry. A reflection of this expectation was a sudden rise in stock market incidentally after their takeover. In its previous regimes, it had taken drastic steps to facilitate and emancipate the industry from the hands of bureaucratic monopoly, instances of which were introduction of Fixed Capacity Tax, One-window facilitation, etc.
Yet now the spirit is seemingly fading away perhaps de-motivated by establishment’s coup of previous regime and fear of recurrence, no doubt, the tempo was broken yet one cannot give this excuse for long. Presently, there are no effective motivational steps to facilitate industry. Power crisis still looms, no effective export promotion measures have been taken and Industrial, Agro and Economic KPIs are not progressing. Unemployment is rising, which will bring frustration in youth and this in turn will be a precursor to crime and terrorism suppressed by force at present.
To promote industry, the forthcoming fiscal review in budget may be an opportunity for bringing about effective reforms to promote industry instead of cutting golden egg laying hen. It is the need of the hour to consolidate too many indirect taxes. Sales Tax, Excise, Custom and Withholding Tax are not only complex for the assesses, but also too costly to manage by state machinery. All these taxes should be consolidated into one indirect tax.
To maintain this complicated taxation system, too many redundant staff is being paid out of state exchequer. Collection efficiency may improve by concentration of attention to one department. Businessmen who are facing difficulties of filing registrations and returns to different offices, will direct their efforts to productive work. Overall Sales Tax burden may not increase by this consolidation because businesses often pay one or other tax, i.e. either, Sales Tax, Excise or Custom; however Withholding Tax may have to be added to this Consolidated Sales Tax.
Rationalization of Corporate Tax may also be a step towards right direction. Corporate Tax rate is higher than firms and individuals despite the fact that corporate profits accounts are comparatively transparent than individuals and firms. Corporate investors are subject to double tax, first the tax on the company and then, zakat, capital gain tax and income tax withheld on dividend. Some may retort that extra tax may be claimed as refund yet every one knows the practical hurdles put by clerical red-taped system.
Tax holidays may be introduced, industry sector-wise and geographic area-wise, to promote economy of sick industry and under-developed industry. Export rebate, with control on mismanagement, needs to be revived, to promote exports and in turn decrease current account and trade deficit by genuine way. Once our pride – the textile sector – has been beaten even by Bangladesh, despite the fact that we were one of the top cotton growing states in the area and Bangladesh was recently established. New technology and energy saving equipment installation and fabrication should also be offered tax holiday.
These suggestions may be too difficult in practice to bring about. Yet as there goes a saying, where there is will there is way. Some convenient yet effective measures proposed above, may be introduced in immediately in forthcoming Finance Bill. Initiatives should be taken by setting up competent professional tax committees with defined timeline, to make detailed plan of feasible and effective administrative and legislative changes for a simple, fair and industry promotional taxation system.
— The author is freelance columnist, serving a public university in area of financial management.