ISLAMABAD: Parliamentary Secretary for National History and Literary Heritage Division Ghazala Saifi said startups, creative social enterprises, businesses and the general public usually see the regulatory bodies including Federal Board of Revenue (FBR) and Security and Exchange Commission of Pakistan (SECP) as threat and fear to approach for any guidance.
While speaking at a roundtable meeting titled “Regulatory Reform Priorities for Social Enterprises” organized by the Sustainable Development Policy Institute (SDPI) in collaboration with British Council and UNESCAP at Islamabad, she urged the regulatory bodies to work on achieving confidence of startups, social enterprises and the businesses through removing the fear factor by providing facilitation and guidance. Moreover, awareness should be raised on the rules, regulations and laws of the regulatory authorities and provided easy access to general public, she added.
Ghazala Saifi said though Creative Social Enterprises (CSE) sector has the potential to create employment and can help achieve inclusive growth, the sector is facing the issue of recognition in the legal regime due to lack of an agreeable and legit definition. She said in consultation with all stakeholders, a clear, short and agreeable definition should be defined at the earliest, which then should be debated for legit definition.
SDPI Joint Executive Director Dr Vaqar Ahmed said social enterprises are facing the issues of financing, taxation, lack of access to public procurement opportunities, legal and regulatory. He said a legal or agreed upon definition for social enterprises can help the sector to get access to bank credit and public grants.
A certification system may be devised by the government which will recognize credible enterprises doing social work, he added. The laws governing corporate social responsibility (CSR) in Pakistan could be revised so that a specific percentage of CSR should go to social enterprises, he remarked. The process of finalizing a unified business registry at SECP should also consider including social enterprises.
He said the Budget 2018-19 allowed permanent tax exemption to some nonprofit organisations. Given that it is difficult for most social enterprises to access permanent exemption, a transparent criterion to allow exemption may be devised.
He said conventional charity and investments in life insurance are eligible for tax deduction in Pakistan. It will become easier for social enterprises to attract investment if similar tax deductions are allowed.
The Government could also consider tax-based incentives linked to improvements in service delivery or locating in economically less developed regions, he proposed.
Director Society, British Council Sadia Rehman said her organization through programs like Developing Inclusive and Creative Economies (DICE) is promoting skills and employability and supports the development of creative and social enterprises for inclusive economic growth in developing countries like Pakistan. She said our focus is on skill development and supporting the young people who are vulnerable and lack the opportunities to grow and thrive.
FBR Director General Dr Muhammad Ashfaq Ahmed while acknowledging the issues and challenges faced by the social enterprises and other businesses said that social enterprise sector need to be differentiated from the Non-Profit Organization (NPOs), as the sector generates the taxable income.
He said in order to get tax incentive, government subsidies and other related benefits there is a need of legal framework available for social enterprises to help recognize the sector. We need to have a social enterprise law to give a status and structure to social enterprise sector, he added.
Khalida Perveen, Joint Director, SECP emphasized the need of exploring the existing benefits provided under the law, which should be made available across the board.
She said that social enterprise sector can only be provided with tax benefits unless or until there is any legal structure available. A representative from Public procurement regulatory authority (PPRA) informed that there are no such rules or procedures available under PPRA law which may provide any favor to any enterprise sector including the non-profit organization.
He said in order to provide favor to social enterprise sector in public procurement, there may require amendments in the PPRA law, rules and procedures.
The meeting ended with the intent that government needs to show seriousness in helping promote social business in Pakistan through promulgation of a social enterprise law. In drafting this law the experience of South Korea, Philippines, India, and Thailand will be studied.
The PPRA will study the idea of ‘social value’ in procurement. This will also prompt other businesses to demonstrate social and environmental value in their business models. Finally, a public-private policy working group will be formed to take forward implementation of these proposals.
Published in The Express Tribune, May 17th, 2019.