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Major Export Associations Reject Proposed Budget Measures

All major export associations in Pakistan have strongly rejected the proposed federal budget measures, particularly the abolishing of the Final Tax Regime (FTR) and other ‘anti-export’ tax policies. The associations, including the Pakistan Hosiery Manufacturers & Exporters Association (PHMA) and the Pakistan Readymade Garment Manufacturers & Exporters Association (PRGMEA), held a joint press conference in multiple cities to express their concerns.

Chief coordinator and spokesperson of All Export Associations of Pakistan, Jawed Bilwani, led the press conference. The participating associations represented various sectors such as textiles, leather, sports goods, surgical instruments, rice, fruits, vegetables, and fisheries. They collectively emphasized that the proposed changes in the budget would have severe consequences for the country’s foreign exchange earnings, revenue generation, and employment.

Bilwani highlighted that the export sector unanimously rejects the transition from the FTR to the Normal Tax Regime, as it is considered counterproductive. He explained that the current system, which involves a one percent tax deduction at source, is efficient and transparent, eliminating human intervention and reducing corruption risks. The proposed changes would introduce unnecessary complexities and potentially lead to increased corruption and inefficiency.

The associations expressed deep concern over the lack of consultation with key stakeholders. They criticized the government for only consulting a select group of industrialists, excluding the officially registered associations and chambers of commerce.

The associations warned of dire consequences if these proposed measures are implemented, including a significant decline in exports, massive unemployment, and potential law and order issues. They urged the government to withdraw these proposals and instead adopt successful export enhancement models from other countries in the region.

Specifically, the associations opposed the shift from the 1 percent turnover-based FTR to a 29 percent tax on taxable profit, arguing that it would be disastrous for the export sector. They also rejected the proposal to eliminate zero-rating on local supplies under the Export Facilitation Scheme (EFS), as it would require lengthy and cumbersome refund processes. Furthermore, they criticized the proposed investigative audits under Section 25 of the Sales Tax Act, which would burden exporters with unnecessary regulations and create an environment of uncertainty and fear.

The press conference highlighted the already high cost of manufacturing in Pakistan, exacerbated by expensive energy tariffs and multiple taxes at the federal, provincial, and local levels. The suspension of key financial support measures, such as the Duty Drawback on Local Taxes & Levies and Regionally Competitive Energy Tariffs (RCET), has further strained the industry. The associations called on the government to focus on broadening the tax base instead of burdening the compliant export sector. They warned that failure to address these issues would result in a significant reduction in Pakistan’s export revenue and foreign exchange earnings, further disadvantaging the country in the competitive global market.

The joint press conference concluded with a clear message: saving the export sector is crucial for saving Pakistan’s economy. The government must take immediate action to address the concerns of the export community and withdraw the proposed ‘anti-export measures’ to prevent an economic crisis.

Source: The News