Export associations reject normal tax regime

KARACHI: All major export associations on Tuesday rejected the proposed federal budget measures, specifically the abolishing of the Final Tax Regime (FTR), and other ‘anti-export’ tax policies.

A joint press conference, held simultaneously in Karachi, Lahore, Faisalabad, Sialkot, and Multan, was led by Jawed Bilwani, chief coordinator and spokesman of All Export Associations of Pakistan.

The participating associations included the Pakistan Hosiery Manufacturers & Exporters Association (PHMA), Pakistan Readymade Garment Manufacturers & Exporters Association (PRGMEA) and several others covering textiles, leather, sports goods, surgical instruments, rice, fruits, vegetables, and fisheries. The associations collectively emphasised that the proposed changes in the budget would severely impact the country’s foreign exchange earnings, revenue generation and employment.

Bilwani underscored that the export sector unanimously rejects the transition from the FTR to the Normal Tax Regime, deeming it counterproductive. He explained that the current system, which involves a one percent tax deduction at source, is efficient and transparent, eliminating human intervention and reducing corruption risks. The proposed changes, however, would introduce unnecessary complexities and potentially open the door to increased corruption and inefficiency.

The associations expressed deep concern over the lack of consultation with key stakeholders. They criticised the government’s approach of consulting only a select group of industrialists, excluding the officially registered associations and chambers of commerce.

Highlighting the detrimental impact of these proposed measures, the associations warned of dire consequences, including a significant decline in exports, massive unemployment, and a potential law and order crisis. They urged the government to withdraw these proposals and instead adopt successful export enhancement models from other countries in the region.

The associations specifically opposed the shift from the 1 percent turnover-based FTR to a 29 percent tax on taxable profit, which, they argued, would be disastrous for the export sector. They also rejected the proposal to eliminate zero-rating on local supplies under the Export Facilitation Scheme (EFS), which would necessitate lengthy and cumbersome refund processes. Moreover, they criticised the proposed investigative audits under Section 25 of the Sales Tax Act, which would impose undue regulatory burdens and foster an environment of uncertainty and fear among exporters.

The press conference emphasised the already high cost of manufacturing in Pakistan, exacerbated by expensive energy tariffs and multiple federal, provincial, and local taxes. The suspension of key financial support measures, such as the Duty Drawback on Local Taxes & Levies and Regionally Competitive Energy Tariffs (RCET), has further strained the industry. The associations called on the government to focus on broadening the tax base rather than overburdening the compliant export sector. They warned that failing to address these issues would lead to a significant reduction in Pakistan’s export revenue and foreign exchange earnings, further disadvantaging the country in the competitive global market.

The joint press conference concluded with a message: Saving the export sector is essential to saving Pakistan’s economy. The government must take immediate action to address the concerns of the export community and withdraw the proposed ‘anti-export measures’ to prevent an economic crisis. All Export Associations of Pakistan representing various sectors including value-added textile exports, apparel, cloth, denim, towel, bedwear, gloves, leather, tannery, carpet, sports, surgical, rice, fruits, vegetables, and fisheries were represented by the PHMA, PRGMEA, Towel Manufacturers & Exporters Association, Pakistan Cloth Merchants Association, Pakistan Denim Manufacturers Association, Pakistan Knitwear & Sweaters Manufacturers & Exporters Association, Pakistan Cotton Fashion Apparel Manufacturers & Exporters Association, Pakistan Bedwear Exporters Association, Pakistan Textile Exporters Association, All Pakistan Bedsheets & Upholstery Manufacturers Association, Pakistan Leather Garments Manufacturers & Exporters Association, Pakistan Tanners Association, Pakistan Carpet Manufacturers & Exporters Association, Pakistan Sports Goods Manufacturers & Exporters Association, Surgical Instruments Manufacturers Association of Pakistan, Pakistan Gloves Manufacturers & Exporters Association, Rice Exporters Association of Pakistan, All Pakistan Fruits & Vegetables Exporters, Importers & Merchants Associations, Pakistan Fisheries Exporters Association, All Pakistan Meat Processors Association, Karachi Chamber of Commerce & Industry, Sialkot Chamber of Commerce & Industry, Faisalabad Chamber of Commerce & Industry, and Pakistan-Afghanistan Joint Chamber of Commerce & Industry.