Zero-rated tax on five export sectors demanded

KARACHI: Opposing the proposal of an increase in sales tax to five percent from two percent, associations of all five exporting sectors have demanded zero-rated tax on all the five export sectors, a statement said on Wednesday.
Zubair Motiwala, former president of the Karachi KCCI and Javed Bilwani, leader of Pakistan Apparel Forum led the participants. Five export sectors include textile, leather, carpet, sports goods and surgical instruments.
They said as the government is unable to refund the amount of sales tax collected from the export sector, there should be no sales tax on exports and even the current two percent sales tax should be withdrawn and the “no payment no refund regime” be revived, as globally there was no tax on export sectors and export goods were manufactured for the foreigners.
The value-added textile exporters were already burdened and crushed due to the rising tariff of electricity, gas and other essential raw materials leading to high costs of doing business in Pakistan as compared to their competing countries.
Huge amount of the exporters’ liquidity is blocked in the sales tax refund claims, amounting to Rs70 billion, customs rebate claims of Rs10 billions and Rs160 billions in DLTL claims.
A total Rs240 billion of the five export sectors are held up by the government.
While Pakistan has the GSP plus status under the belt, textile exports of Pakistan have gone down by 16.23 percent in March 2015 as compared with previous year’s month while overall exports have gone down by
13.44 percent. From this it was clear that any increase in rate of sales tax would further lead to decline in the exports of Pakistan which would result in decline in foreign exchange earnings and increase in the trade deficit leading to further imminent shifting of large number of industries abroad causing mass unemployment and worsening law and order situation.
The Federal Board of Revenue (FBR) should widen the tax net to bring in more taxpayers rather than punish the genuine taxpayers, the foreign exchange earners, they said.
In Pakistan “no payment no refund” system was introduced in 2005 and was successful and continued for almost nine-and-a-half years. This facility not only generated much revenue, but stopped fake refunds, as well as gave great comfort to the exporters, they added.