Tax collection from exports drops 25 percent in April

KARACHI: Tax collection from exports sharply fell 25 percent year-on-year in April as the lockdown adversely hurt foreign trade for almost two months before having eased recently.

Large Taxpayers Unit Karachi’s data on Wednesday showed that collection of income tax from export proceeds decreased to Rs402 million in April compared with Rs538 million in the corresponding month of the last fiscal year.

The country’s exports were adversely affected as the government imposed lockdown after the coronavirus outbreak. Exports registered a 54 percent decline in April, according to the Pakistan Bureau of Statistics. Exports were recorded at $957 million in April compared with $2.09 billion in the same month of the last year.

Exporters lost their foreign orders due to the global pandemic while lockdown added insult to injury with local manufacturing activities kept almost on halt. There was a slowdown in clearance of foreign trade cargoes as transportation was banned. However, the collection of income tax from exports posted an increase of 27 percent during the first 10 months of the current fiscal year of 2019/20. Collection of income tax from exports increased to Rs5.65 billion in the July-April period of 2019/20 compared with Rs4.45 billion in the corresponding period of the last fiscal year.

Sources attributed the increase in income tax to better earnings in terms of rupees. Rupee value significantly declined against the US dollar during the period as against the corresponding period of the last fiscal year, which enhanced the export earnings.

Exports registered a decline of 3.92 percent to $18.41 billion during the July-April period compared with $19.16 billion in the corresponding period of the last fiscal year. However, in terms of rupee, exports witnessed 12.71 percent growth to Rs2.88 trillion. That compares with to Rs2.56 trillion in the same period of the last fiscal year.

The Federal Board of Revenue collects one percent tax from exports on foreign receipts, which is final discharge of liability, of exporters. Commercial banks and foreign exchange companies are required to collect one percent income tax on behalf of the tax authorities from exporters at the time of realisation of foreign exchange proceeds.

Sources said tax collection from exports might further witness a decline in coming months due to aftereffects of COVID-19. Economic activities started to gradually come back to normal as the government eased lockdown after dillydallying on standard of procedures to prevent local transmission of the virus.

International Monetary Fund (IMF) cautioned Pakistan against high uncertainty related to exports.

“Externally, the global downturn, including in Pakistan’s major export markets (China, the EU, and the U.S.), would reduce demand for Pakistan’s exports, especially textiles, and lead to more limited financial flows,” the IMF said in a report. Pakistan is currently implementing IMF’s reforms under the $6 billion extended fund facility to avert balance of payment crisis.