Construction industry says new taxes discriminatory, will hurt growth

Imposition of taxes on assets, rather than income, causes worry.

KARACHI: The Association of Builders and Developers of Pakistan (ABAD) has said that a number of new taxes introduced in the federal budget for fiscal 2014 are discriminatory and will hurt the construction industry’s growth in the country.

Speaking to The Express Tribune, ABAD Vice Chairman Nusrat Mirza Chughtai said the new taxes slapped on the construction industry were unfair because they were not levied on incomes. “All over the world, builders are taxed on their income, rather than the units of area on which they construct buildings,” Chughtai observed.



The federal government has proposed to impose a tax on construction to the tune of Rs25 per square feet, besides a separate tax of Rs50 per square yard on land purchased for development purposes.

“The new tax is inherently discriminatory. We will use all legal means to resist its imposition,” he added.

According to the Economic Survey of Pakistan 2012-13, the construction sector grew 5.2% between July 2012 and March 2013, compared to a growth rate of 3.2% registered in 2011-12. The construction sector’s share in the country’s gross domestic product (GDP) is estimated to be 2.4%.

ABAD’s vice chairman also expressed his reservations on the 1% increase in the general sales tax rate which, he said, had caused a sudden hike in retail prices of most construction materials. “Taking undue advantage, most suppliers of construction material have jacked up prices between 9% and 13%. Prices of cement, steel, tiles and wood have hit the ceiling,” he claimed

As soon as the federal budget was presented, the price of a 50-kilogramme cement bag increased by as much as Rs35, he said. “Instead of Rs404, the current price of one bag of cement is now Rs435, even though the finance bill hasn’t been approved yet.” Similarly, the price of one ton of steel has gone up from Rs75,000 to Rs78,000 over just a few days, he added.

Published in The Express Tribune, June 20^th, 2013.

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