Tuesday, October 5, 2010

Plea for Withdrawal of Turnover Tax

Addressing a press conference in Karachi, Chairman, All Pakistan Consumer Products Distributors Association (Apcpda), Tahir Khaliq demanded withdrawal of one percent turnover tax imposed in federal budget 2010-11 on distribution of consumer products and medicine. As he put it, although the turnover of distributors is immense their margin of profit is very nominal and they are unable to pay this tax. According to his argument, distribution work would come to an end in the event of the government declines to withdraw the turnover tax, saying distributors were operating on fixed margin of profit or commission, ranging from 1.5 percent to 6 percent, and on the terms and conditions of manufacturers. However elaborating on the role of distributors, he noted that they purchase the goods at high prices from manufacturers, store the in warehouses, and then supply them shop to shop by vans, thereby, costing them a lot of money, which is met from the commission they earn.
From all available indications, the Apcpda, will appear to have built its case on the fast moving consumer goods (FMCG) which goes, generally speaking, to the advantage of the manufacturers of branded goods, and not to government from the insignificant tax on its distribution. As for the financial gains accruing from the entire business cycle, there can be no two opinions on the identity of the brand owners. More to this, the brand image, which has been defined as a symbolic construct created in the minds of people and comprising all the relevant information around the given product or service. This is why those engaged in branding are usually after associating the expectations behind the brand experience, thereby, striving to establish that the given branded product or service possesses qualities or characteristics that adds to its value in one way or the other. This is one single aspect which is emphasized the most in brand’s advertising at huge costs. Needless to point out, it does demonstrate what the brand owner is in a position to offer to the consumers. It goes without saying that brands should be taken as more than the difference between the actual cost of a product and its selling price. Moreover, his assertion that the distributors earn 1.5 percent to 6 percent on their total turnover, should allow them enough margin of profit, from the approach of economies of scale. His plea that the supply of goods and medicines would come to a standstill in the event of distributors close down their businesses, will also leave a great deal to be desired. Of course, Apcpda chief’s observation the association would contact the finance minister, members of national assembly and the senate to apprise them of the impact of turnover tax on distribution of consumer products should appeal to reason.

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