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Pakistan’s value added textile exporters reject introduction of minimum tax regime

  

In a united front against the proposed tax changes in the upcoming 2024-25 budget, value-added textile exporters have vehemently rejected the introduction of a minimum tax regime that includes extensive scrutiny. They argue that this move would replace the existing Final Tax Regime (FTR) and create unnecessary complications, potentially increasing the risk of corruption.

At a press conference held at the PHMA House, representatives of the Value-Added Textile Exporters Forum voiced their concerns. Muhammad Jawed Bilwani, Chief Coordinator of the Value-Added Textile Associations Forum, stated, this proposed shift will lead to unnecessary hassle and involve Federal Board of Revenue (FBR) officials, which may increase the risk of corruption.

Currently, under the FTR, a 1 percent tax is deducted electronically from export remittances, with no human intervention. Bilwani explained, from the next fiscal year, it has been proposed that this 1 percent should be treated as a minimum tax, requiring exporters to submit documents justifying their income and expenditures.”

Bilwaniemphasised that the FTR allows income tax to be deducted directly at the source when remittances are received, regardless of profit or loss. He highlighted the issue of corruption within the FBR, referencing the recent ‘speed-money case’ in LTU Lahore where FBR officials were implicated in corrupt practices.

The textile exporters urged the government to maintain the current Final Tax Regime without changes. They also requested a reduction in the income tax rate from 1 percent to 0.5 per cent. Bilwani noted, exporters file their Sales Tax Refunds electronically through the FASTER system, which ensures no human intervention and efficient claim processing and disbursement.

The exporters warned that the proposed changes would be counterproductive, potentially leading to a significant reduction in Pakistan’s export revenue and foreign exchange earnings. They cautioned,if these changes go through, Pakistan could lose out to countries like India, Bangladesh, Cambodia, and Vietnam.”

Moreover, they criticised the lack of consultation by the Finance Minister, Chairman FBR, and Commerce Minister with the Textile Export Associations regarding the Federal Budget 2024-2025. Despite forming 14 Tax Reform Commissions over the years, effective restructuring and reforms have not been achieved, they noted.

The export industry is already burdened with multiple taxes from federal, provincial, and local governments, as well as other surcharges and levies. Bilwani urged,the industry needsto bring back policy discount rates back to single digits and return Export Finance Scheme (EFS) rates to previous levels. Additionally, the industry needs to allowexporters back-to-back Letters of Credit (LC) on a model similar to Bangladesh.

The press conference was attended by key industry figures including Abdul JabbarGajiani, Chairman PHMA (SZ), Sheikh Shafiq, Chief Coordinator, PRGMEA, and other notable representatives from various textile associations. The Value-Added Textile Associations encompass major groups such as the Pakistan Hosiery Manufacturers & Exporters Association (PHMA), Pakistan Readymade Garment Manufacturers & Exporters Association (PRGMEA), and several others.

 
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