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Govt warned of 30pc decline in exports


June 5, 2019

KARACHI: Exporters on Tuesday warned the government of a staggering 30 percent decline in exports in a year if it abolishes zero-rated tax status for the export-oriented industries.

The exporters said the loss in exports would emerge within the first year after the withdrawal of zero-rated tax facility that gets rid businesses of refunds claims. The government planned to abolish the zero-rated tax facility awarded to the five export-oriented sectors in order to mobilise revenue ahead of the International Monetary Fund’s (IMF) program.

The government assured the IMF that it would do away with the zero-rated tax status to five industrial sectors – textile, leather, carpet, sports and surgical.

The $6 billion worth of three years extended fund facility program is expected to begin from the next 2019/20 fiscal year. Associations of five zero-rated industrial sectors have posted posters and banners all across the city, demanding continuation of the zero-rated facility.

The posters have been placed at various important and commercial hubs. They have been protesting against the government’s decision to end the zero-rated facility through press conferences and protests over the last couple of days as the government is about to announce its first annual budget next week.

The protesting associations include All Pakistan Textile Mills Association, Surgical Instrument Manufacturers Association of Pakistan, Pakistan Leather Garments Manufacturers and Exporters Association, Pakistan Tanners Association, Pakistan Sports Goods Manufacturers and Exporters Association, and Pakistan Carpet Manufacturers and Exporters Association.

Their representatives said collection of sales tax and then refund is a futile exercise, which creates hassles for exporters and opens floodgates of corruption. On the other hand, no collection and no refund of sales tax is a tried and tested formula for increasing revenue and exports.

Business community said discontinuation of the zero-rated status would ruin export-oriented industries and lead to flight of capital, mass unemployment and huge foreign exchange losses. It would also result in corruption under the modes of flying, over-invoicing and frauds in refunds.

Exports growth would adversely be affected due to significant volumes of liquidity being stuck in the form of sales tax refunds, they added. More than Rs200 billion of refunds are already held up with the government.

The five zero-rated sectors are already documented, contribute 70 percent of the country’s total exports and employ half of the workforce. The associations also conveyed serious apprehension on the proposed abolition of final tax regime for exporters.