ABAD Urges Tax Policy Reform for Economic Boost.

Karachi, June 2024: Chairman of the Association of Builders and Developers (ABAD),Asif Sum Sum has urged the federal government to implement a favorable tax policy for the construction industry in the budget 2024-25 to boost the national economy. He stated that the imposition of a 1% tax on undeveloped plots has caused overseas Pakistanis to halt their investments in Pakistan. To attract foreign exchange, he called for the abolition of Section 7-E of the Income Tax Ordinance. Chairman ABAD made these demands during a press conference at ABAD House, accompanied by Senior Vice Chairman Ibrahim Habib, Vice Chairman Zeeshan Siddiqui and Chairman Southern Region Mustafa Shekhani.
Chairman Asif Sum Sum emphasized the significant role of the construction sector in economic development, noting its substantial contribution to GDP growth and its status as the second-largest employment provider after agriculture. He highlighted that ABAD provides employment to millions, with the construction sector being the highest contributor to the national GDP. He pointed out that 60 to 70 percent of the investment in the construction sector flows into local industries. For instance, when a construction project begins on a 1,000-yard plot, Rs. 800 million worth of construction materials are purchased from local industries. This illustrates the potential for substantial investment and the revival of numerous local industries if construction activities commence nationwide.
Asif Sum Sum clarified that their demand for a fixed tax regime (FTR) does not mean seeking tax concessions. The implementation of FTR would provide investors with clear information about their tax liabilities from the project’s approval stage, thus preventing harassment by tax officials. He asserted that if the government wants to increase remittances, it must promote the construction sector.
Referring to the “Dubai Leaks,” Chairman mentioned the revelation of $11 billion worth of investments by Pakistanis in Dubai, stressing the need to understand the reasons behind such investments. He argued that a conducive investment environment in Pakistan would prevent capital flight. He noted that investment in plots is for future development and taxing unused plots under Section 7-E would discourage investors.
He explained that 2,200 construction projects are registered under Section 100-D of the Tax Ordinance, whose term ended in September 2023. Due to inflation increasing by 250% in recent years and the rising value of the dollar, the grey structures of these projects have faced delays. He praised the efforts of Army Chief General Syed Asim Munir for stabilizing the Pakistani rupee and reducing smuggling, describing the Special Investment Facilitation Council (SIFC) as Pakistan’s lifeline.
He urged the government to extend the deadline by two years for completing the grey structures of projects registered under Section 100-D in the 2024-25 budget. Chairman ABAD mentioned that while 100% tax has already been paid on these projects, an additional 3% tax is now being demanded under Section 236 of the Tax Ordinance, which he deemed unfair and contrary to the principles of justice. He stressed that ABAD members are willing taxpayers, but they need to work to be able to pay taxes. To increase tax revenue, the government should promote construction activities.
He noted that the foundation of the China-Pakistan Economic Corridor (CPEC) lies in Gwadar, where construction activities are currently halted. ABAD’s 107 members have invested in Gwadar, and he expressed hope for the revival of construction activities following Prime Minister Shehbaz Sharif’s visit to China. He lamented that the government did not seek ABAD’s suggestions for the budget and called for consultation to increase tax revenue.
In conclusion, Asif Sum Sum expressed concern over the rising lawlessness in Karachi city, stating that the construction sector is the most affected by deteriorating law and order situation. He urged the government to implement their proposals to stimulate construction activities, which would also boost local industries, resulting in trillions of rupees in tax revenue for the government.