Pakistan hosiery manufacturers want the sales tax zero-rating regime for five export-oriented sectors to be continued. They say, withdrawal of the zero-rated tax regime would unleash a flight of capital. During the last two decades the zero rating was undone twice. The five zero-rated sectors contribute 60 per cent to total national exports and generate 40 per cent to total employment.

The currency has lost 21 per cent of its value against the dollar in nine months. Exporters say this will add to the cost of machinery imports. Production costs of the export industry have already increased due to the interest rate hike. Nearly 60 per cent of the raw material of the export industry comes from other countries. In this situation, the industry fears having to acquire finance from banks at an interest rate of 15 per cent, which will increase the industry’s cost of doing business.

Another complaint of the industry is that significant volumes of liquidity are stuck in the form of sales tax refunds and customs rebates. Collection of sales tax and then refunding is seen as a futile exercise. The industry also wants a plan to increase the taxpayers’ base to help the country overcome its monetary deficit.