ISLAMABAD: Economic experts and corporate heads on Wednesday advised the government to reduce current account gap by rolling over foreign loans, diversifying exports and rationalising tax structure.

The advices emerged during a daylong economic forum organised by Pakistan Business Council, which is a leading business advocacy group of 67 largest private sector companies.

Ishrat Hussain, ex-governor of State Bank of Pakistan supported the one-time amnesty scheme proposal for declaration of foreign assets.

Hussain said government will have to create a breathing space for the country’s external account by requesting donors to grant rollover on foreign loans as yawning current account and trade deficits are major risks to the economy.

The economist stressed need to continue exports package. “Prime Minister must hold review meetings by inviting major exporters to continue boosting exports,” he said.

Hussain called for more steps to ensure remittances through official channels much like Pakistan Remittance Initiative.

Former SBP governor said there is a discrepancy in foreign direct investment data of the central bank and Pakistan Bureau of Statistics. “If this discrepancy is removed the FDI figure can go up.”

Tax expert Shabbar Zaidi said the country’s taxation system is heavily relying on imports as 55 percent of general sales tax is collected at the import stage.

“As rising trade and current account deficits increase tax collection there is a bias against manufacturing sector and industrialisation,” Zaidi added.

The tax expert also advocated the amnesty scheme proposal for people holding foreign assets. There is a need to understand protection of foreign currency accounts given through a law amendment in 2001, he said.

Zaidi said there should be consensus among political parties on taxation matters as it could not be done in ‘isolation’.

He advised the government to cut general sales tax to 15 percent, while effective rate under value-added tax mode should not be more than 5 to 7.5 percent.

Ali Salman Habib, chairman of Indus Motor Company Limited (IMC) emphasised ‘skilful’ approach for finalising free trade agreements as exports are declining.

Salman said the manufacturing sector contributes around 30 percent to GDP growth, but its share in tax collection is almost 60 percent.

IMC chief said there is a need to promote small and medium enterprises sector.

Syed Yawar Ali, chairman of Nestle Pakistan called for focus on genetics in agriculture sector to enhance agri-production capacity.

Ali said average milk yield of indigenous cows was on par with USA a few decades back, but now in US the yield increased to 9,000 litres whereas it remains stagnant at 1,300/cow in Pakistan.

Abdul Razak Dawood, ex-commerce minister said the policymakers are repeating mistakes which they had done during the 90s by imposing regulatory duties on raw materials.

“We keep changing duty structure on imports, which should not be done,” Dawood added.

The former commerce minister, citing an example, said an investor planned to invest $300 million in Pakistan, but he was hesitant to do so because of the country’s tax structure.

He said the businessmen have to learn that they should not ask for special statutory regulatory orders.

“Exports of $100 to $200 billion will not be possible with reliance alone on textile and cotton,” he added. “We will have to focus on engineering, chemical and information technology sectors to boost exports.”

Published in The News International