We are required to submit so many forms/returns, some monthly, other quarterly and yearly, that I believe as ADB says, that not just 17% of our time goes to fulfilling these formalities, but it adds to our cost and in turn the cost of goods and services we offer.
SOME OF THESE REQUIREMENTS ARE: 1. Deposit staff income tax deductions. 2. Submit to I. Tax Dept. returns of staff deductions. 3. Deduct withholding tax from vendors. 4. Submit details to Income Tax Dept. withholding tax deduction. 5. Submit company Income Tax return. 6. Deposit Sales Tax returns. 7 Audit annual accounts (why for SMEs). 8. Submit form-29 to registrar. 9. Form A to registrar. 10. Submit social security returns. 11. Submit professional tax returns. 12. Karachi Chamber of Commerce membership. 13. Submit credit facility renewal forms (yearly). 14. Company stocks statement to bank for credit facility (monthly).
In addition to these bureaucratic formalities other pinprick hindrances are put in our path, viz: 1. Bid Bonds - every government tender requires a bid bond of 1 to 2% in the form of a bank guarantee or pay order. 2. Performance Bonds - 10% of tender price in the form of bank guarantee. 3. Ridiculously high prices for purchasing tenders.
Most times the advertisement does not give enough details so that a SME can determine whether he can provide the goods and services requested. Many times we find after purchasing a tender that it is not within our scope.
A typical SME does not have the resources to meet these bank guarantees as the banks require deposit of 100% of the Bond value.
The banks plead it is a State Bank requirement (Prudential) so they can't help.
Why can't the tenderer accept insurance guarantees, which are cheaper and require less collateral? Maybe the State Bank can modify the prudential regulations.
If the government is serious about expanding the SMEs, who provide 80% of the employment, then radical change not only in the rules and regulations are required but also in the attitude and thinking of our bureaucracy and high-ups in the government enterprises.
As an additional service to SMEs I request the editors to publish the complete report of ADB.