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Business, industry give mixed response to federal budget

KARACHI: Business and industrial community have given a mixed response to the federal budget for fiscal year 2025–26 presented by Finance Minister Muhammad Aurangzeb at National Assembly on Tuesday. They were of the view that final reaction can only be given after going through budget documents in details. Ahmed Azeem Alvi, President of the Site Association of Industry (SAI), shared detailed feedback on the federal budget proposals after the association submitted six key recommendations to the government. While acknowledging some positive steps, he stressed the need for clearer policies, faster tax refunds, and digital reforms to support exporters and industries. SAI Chief noted that the government has recognised the need for customs sector relief and intends to implement reforms. However, he cautioned that the full impact of these measures will only be clear once the detailed budget documents are released. 'The government has accepted our concerns regarding the performance of the Freight Station and made commitments,' he said. He also highlighted SAI's demand for the immediate repeal of the Income Tax Ordinance issued on May 4, expressing hope that the budget papers would clarify the government's stance. One of Alvi's key concerns was delayed income tax refunds for exporters. He urged the government to ensure refunds are processed within 15 working days through banks. 'Delays force exporters to bear extra costs and liquidity issues,' he said. 'A transparent, corruption-free system is needed to ensure timely refunds.' SAI Chief emphasised the need for digitalization, transparency, and a one-window operation to cut red tape. Currently, 69 federal and provincial agencies conduct factory inspections, creating inefficiencies. 'Reducing these inspections will allow industries to focus on growth rather than compliance burdens,' he said. However, he expressed disappointment that the budget does not adequately address digitalization and one-window reforms, measures crucial for improving the ease of doing business. Alvi criticised the government for not expanding the tax net while setting ambitious revenue targets. 'Instead of focusing on Karachi, which contributes 54% of Pakistan's tax revenue, relief is given to regions with poor recoveries,' he said. He called for policies to further boost Karachi's tax contributions. He also slammed the inclusion of circular debt charges in Karachi's electricity bills, calling it an injustice. 'Despite expectations, the government has not removed these charges, making Karachi one of the most expensive cities for electricity,' he lamented, criticising both federal and Sindh governments for neglecting the issue. Ahmed Azeem Alvi said that while the budget shows some promise, a full assessment will only be possible once detailed documents are released. 'The real test will be whether the government delivers on reforms that truly ease business operations and support industrial growth,' he concluded. However, Salim Valimuhammad, Chairman of the Pakistan Chemicals & Dyes Merchants Association (PCDMA), expressed a mixed reaction to the federal budget. He noted that many aspects of the budget remain unclear, with several SROs (Statutory Regulatory Orders) yet to be issued. According to him, once these SROs are announced, the details will become clearer for stakeholders. He welcomed the reduction in tax rates for the salary class, though he pointed out that the cuts were not substantial for the higher salary brackets. Specifically, the duty on dyes has been reduced from 16% to 15%, while a 5% duty has been imposed on items that were previously zero-rated. However, Salim raised concerns about the extensive powers granted to tax authorities under the new budget, warning that these measures could negatively impact businessmen. He expressed that while the budget shows some improvements, it is not without flaws. Regarding the Export Facilitation Scheme (EFS), PCDMA Chief was critical and suggested that it should have been completely withdrawn, citing numerous abuses of the scheme. He mentioned that the scheme previously focused mainly on major cotton and related sectors, but with the introduction of duties and an 18% tax, preventing misuse of EFS will still remain challenging. Overall, Salim Valimuhammad said that the budget was somewhat better than before, urging clarity on pending regulations and cautioned about the potential effects of increased tax authority powers on the business community. However, Ateeq ur Rehman, an economic & financial analyst said he was surprised that nothing was discussed for stopping brain drain, growth of agriculture, industry, manufacturing, port/ shipping/ logistics, maritime and exports. He said incentives, targeted policy reforms, and inflation were also not discussed. He said as a matter of fact industry and exports cannot grow with the costly energy and gas, high tax and interest rates. He said the government has to give ample incentives. He said there was a silence on our being a debt-oriented country, adding we have to cut all our non-development expenditures and improve institutional capacity for development. He said about SME financing, some good steps have been announced but access to finance has to be implemented in real time. Easy access to education for all, healthcare services and arrangement for clean water needs more funds. The little relaxation of tax on salaried class is really appreciable, he said. Copyright Business Recorder, 2025