KARACHI: Multinational companies are worried about “unstable” economic environment, falling currency, high taxes imposed in the last six months and a general “lack of clarity”.

The representative body of large foreign firms has approached the ministers of fina­nce and planning and development to register the growing “dissatisfaction” amo­ng investors as well as their global headquarters.

Overseas Investors Chamber of Commerce and Industry Chief Executive M. Abdul Aleem said a recent survey of OICCI’s 200-plus members from 35 countries revealed their top five concerns at the moment are inconsistent tax policies, lack of clarity on economic issues, minimum turnover tax/withholding tax on interest income and dividend, volatility of economic inputs and rising fuel, foreign exchange and import costs, and a deteriorating security situation.

He said the withholding tax regime should be revamped and reduced from the existing 26 to five rates for filers. “The withholding tax regime continues to be a key irritant for most taxpayers, especially the manufacturing and services sector.”

He also demanded that the number of tax payments and filing frequencies be reduced. The payment and filing of various returns are a cause of great hardship to compliant taxpayers and may well be a major reason for tax evasion and non-registration as taxpayer, he said. The government should also eliminate the culture of amnesty schemes, which discourage honest taxpayers, he added.

In its recommendations on the investment policy that the OICCI shared with the two ministers, the chamber said all policies should last at least 15 years through constitutional support. Moreover, all investor agreements should include a guarantee that incentives will not be withdrawn whimsically.

It demanded that the government adopt performance-based fiscal and non-fiscal incentives. For example, tax rebates, like a 10 per cent cut on the corporate tax rate, be extended on achieving specified performance measures. There should be rebates for achieving indigenous production targets, such as vehicle manufacturing. Companies should also receive super-tax breaks on bringing in foreign direct investment (FDI) through the sale of shares, it demanded.

It asked the government for tariff rationalisation on imports focused on the transfer of technology and knowledge in addition to subsidies on brownfield and efficiency projects, which enable import substitution or are strategic in nature, such as fertiliser.

The chamber also suggested that local companies should be allowed to make offshore investments if the amount is equal to the FDI they bring in through joint ventures and partnerships.

The OICCI made a strong case for the pharmaceutical sector in its latest communication with the two ministers. “This sector is increasingly facing tremendous difficulties and impediments related largely to over-regulation, which is hampering investment and growth,” it said.

The pharmaceutical industry imports raw materials to manufacture drugs and finished products like oncology drugs and vaccines. “The price for all drugs is controlled and a volatile exchange rate is making it extremely difficult to ensure the availability of most drugs in the market… the restrictions on foreign exchange and changes in remittance policies severely impact the ability of firms to continue doing business.”

Published in Dawn, September 30th, 2022