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November 22, 2020

Exports tax collection surges 50pc to Rs803mln in October

Business

November 22, 2020

KARACHI: The Federal Board of Revenue (FBR) saw tax collection from export sector sharply grow 50 percent year-on-year in October as exports rebounded following ease in economic restrictions related to coronavirus, official data showed.

Income tax collection from exports increased to Rs803 million in October from Rs536 million in the same month a year earlier.

Exporters realised significant amount of export payment during the month. The FBR collects one percent as income tax at the time of realisation of export payments. Banks and exchange companies collect the income tax from exporters on behalf of the FBR.

Exports posted 4.2 percent growth to $2.1 billion. That was compared with $2 billion in the same month of the last year.

Exports showed first recovery in July after consecutive downtrends since March amid coronavirus lockdown. Ease in lockdown paved way for clearance of orders stuck on ports.

Exports continued to show contraction since the government took charge. Trade deficit narrowed 27.1 percent to $23.1 billion in the last fiscal year of 2019/20, but the reduction was mainly caused by suppressing imports rather than export sector’s recovery. Exports declined 6.8 percent to $21.3 billion, whereas imports sharply fell 18.6 percent to $44.5 billion during the last fiscal year.

The SBP said the economic fallout from the Covid-19 pandemic has been severe.

“Exports were on track to record positive gains until March 2020, before declining sharply in the fourth quarter amid the Covid-19 pandemic,” the State Bank of Pakistan (SBP) said in a report. “Effectively, the entire reduction in the trade deficit came from imports, which fell to a nine-year low in the year.”

Significant inflows of export payment also helped the local currency to gain significantly against the dollar. Rupee recovered around Rs4 against dollar in October.

The rupee was at Rs173.7 to a dollar on October 1 and appreciated to Rs169.1 to the dollar on October 29, according to the SBP.

The collection of income tax from exports increased to Rs2.4 billion during the first four months of the current fiscal year compared with Rs2.3 billion in the same period of the last fiscal year.

Collection of income tax on exports declined 12 percent during the first quarter of the current fiscal year of 2020/21 as laggard outbound shipments were further affected by lockdown.