Overseas Investors' Chamber of Commerce and Industry (OICCI) is an organised body that often conveys its views to the government about latter's economic policies. In a letter sent to the Finance Minister, Chief Executive OICCI, Abdul Aleem, has forcefully argued that some of the taxation measures proposed in the Finance Bill 2017, including a few 'surprises', would hamper government's efforts towards building trust for foreign investors and attracting new FDI. Foreign investors are seriously concerned about the continuation of super tax which was initially imposed for one year in 2015-16 on large corporations. A large part of "super tax, we understand, is collected from OICCI members whose headquarter management takes a negative view of such ad hoc measures," the OICCI letter said. The Chamber also took exception to the abolition of tax credit that was introduced to encourage documentation of economy. The OICCI said this credit was enhanced to 3 percent during the last fiscal year and there is a proposal to increase it to 5 percent in the FY2017-18 budget. The Chamber also warned that the proposed 10 percent tax on companies, which do not distribute 40 percent of their profit as dividends, will work against capital formation in the economy required for growth and investment, and will also lead to multiple taxation on the same amount.

It may be mentioned here that policymakers of the country need to give due importance to the views of the OICCI due to their role in the economy as well as their perceived influence on the attitude of the potential foreign investors who may be still analysing the desirability of selecting Pakistan as a destination of their investment. Also comical is the fact that Pakistan requires FDI inflows urgently and in greater amounts due to very depressed rates of savings in the economy and the need to revive growth and reduce unemployment as soon as possible. Coming to the present concerns of the OICCI, all of them seem to be largely justified. Super tax on large corporations was imposed in 2015-16 but has continued since despite a general understanding that this tax was levied due to exceptional circumstances and would be removed in the subsequent year. It is also true that a fair chunk of this tax is collected from the OICCI members who are keen to see that the government's fiscal policy is consistent, predictable and transparent for attracting investment and creating jobs. Abolition of tax credit is also not advisable. This measure was introduced to encourage documentation of the economy. The Chamber seems to have rightly pointed out that "it is a matter of surprise that without any noticeable increase in the broadening of the tax base or documentation of the economy, this incentive has been withdrawn abruptly, which will be counterproductive and may encourage non-filers and those working against the documentation of economy." The proposal of 10 percent tax on companies that do not distribute 40 percent of their profit as dividend could certainly work against capital formation due to greater incentive for dividend distribution and be a constraint on higher retained earnings. Since a review of all the taxation measures proposed by OICCI do not involve large budgetary revenues, we are of the view that their concerns may be considered seriously, and if possible addressed, before the Finance Act, 2017 is approved in order to encourage foreign investment in the country.

Copyright Business Recorder, 2017