Exporters oppose new hybrid tax model

KARACHI: Exporters of rice, fruits, vegetables, and pharmaceuticals have objected to the government’s proposed national tax regime of 1.0 per cent tax on turnover, arguing that it would negatively impact their enterprises by taking 30 per cent of their profits.

This was said on Saturday at a news conference at the Karachi Press Club by Chela Ram Kewlani, chairperson of the Rice Exporters Association of Pakistan (REAP). Representatives from the All Pakistan Fruit & Vegetable Exporters Association (PFVA), Pakistan Pharmaceutical Manufacturer Association (PPMA) and former REAP chairs Abdul Rahim Janoo and Rafique Suleman were also present at the press conference. Chairperson of REAP opposed the recent budget announcement regarding the conversion of export trade from the final tax regime (FTR) to a hybrid model ie “the national tax regime (NTR) coupled with the minimum tax regime (MTR)”. He demanded the continuity of the fixed tax regime.

He claimed that the country’s export industry would suffer greatly from this combination. As the hard-earned foreign exchange export sector is being forced to close.

He said that the current FTR regime is 1.0 per cent turnover tax, which is equivalent to 30-35 per cent tax on profit for exporters. Now they are suggesting to convert to NTR plus 10 per cent super tax with minimum 1.0 per cent paid. “This means 39 percent tax on profit of exporters. This will create a disastrous impact on export trade, as in this case FBR officials may audit the books of accounts of exporters and may assess the profit/loss of exporters, which will open the doors of corruption and kickbacks as well as involvements and harassment by FBR officials,” he said. He said exporters even making losses would have to pay 1.0 per cent on turnover and then go into NTR to explain to tax authorities regarding their profit and loss. “The income tax is on income, why should a company pay tax if it has incurred losses,” Chela Ram added.

They complained that the government did not take exporters on board before making such decisions which were not in favour of export trade.

The chairperson of REAP warned that due to the new policy, “exporters will have to face huge losses and exports will be collapsed. We have no other option except to stop exports and shut down our factories,” Chela Ram said.

They said that rice farmers would have to bear huge losses, as losses would be trickled down to the paddy purchase level.