CCP urges govt to withdraw imposition of 'capacity tax' on beverage industry
(Frontier Star (Pakistan) Via Acquire Media NewsEdge) The Competition Commission of Pakistan (CCP) has issued a Policy Note to the government recommending it to withdraw the imposition of ‘capacity tax’ on the beverage industry.
The CCP took notice of various news items raising concerns by the beverage industry on the imposition of Federal Excise Duty (FED) and Sales Tax, vide notification SRO No. 649(I)/2013 dated 9th July, 2013 on production/installed capacity instead of actual sales.
As per the SRO, factories having foreign or mix of foreign and local origin filling machines have to pay PKR 4,700,000, factories exclusively having local origin filling machines to pay PKR 3,760,000, and factories having filling machines with less than 40 filling valves have to pay Rs 1,175,000.
The Commission noted that the levy based on the installed capacity results in imposition of a fixed tax on manufacturing units with varying levels of actual production and thus, discriminates against the smaller manufacturers. This also results in a number of competition concerns.
Once the smaller manufacturers are driven out of the market, competition will be reduced, and the consumers will be left with limited choices, commission observed.
These brands cannot sell at the same price as the high profile brands, but they do compel a high profile brand to maintain a proportionate price, otherwise it would start losing market share.
The Commission noted that Capacity Tax is a regressive way of revenue collection and gives unfair and unnecessary competitive cost advantage to those manufacturers who have high rate of capacity utilization over those who have less demand in market and are not able to fully utilize their installed capacity.
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