BY: WAQAR HUSSAIN
All Export Associations of Pakistan from Value-Added Textile Exports, Apparel, Cloth, Denim, Towel, Bedwear, Gloves, Leather, Tannery, Carpet, Sports, Surgical, Rice, Fruits, Vegetables & Fisheries represented by Pakistan Hosiery Manufactures & Exporters Association (PHMA), Pakistan Readymade Garment Manufacturers & Exporters Association (PRGMEA), Towel Manufacturers & Exporter Association (TMA), Pakistan Cloth Merchants Association (PCMA), Pakistan Denim Manufacturers Association (PDMA), Pakistan Knitwear & Sweaters Manufacturers & Exporters Association (PAKSEA), Pakistan Cotton Fashion Apparel Manufacturers & Exporters Association (PCFA),Pakistan Bedwear Exporters Association (PBEA), Pakistan Textile Exporters Association (PTEA), All Pakistan Bedsheets & Upholstery Manufacturers Association (APBUMA), Pakistan Leather Garments Manufacturers & Exporters Association (PLGMEA), Pakistan Tanners Association (PTA), Pakistan Carpet Manufacturers & Exporters Association (PCMEA), Pakistan Sports Goods Manufacturers & Exporters Association (PSGMEA), Surgical Instruments Manufacturers Association of Pakistan (SIMAP), Pakistan Gloves Manufacturers & Exporters Associations (PGMEA), Rice Exporters Association of Pakistan (REAP), All Pakistan Fruits & Vegetables Exporters, Importers & Merchants Associations (PFVA),Pakistan Fisheries Exporters Association (PAKFEA), All Pakistan Meat Processors Association (APMEPA),Karachi Chamber of Commerce & Industry (KCCI), Sialkot Chamber of Commerce & Industry (SCCI), Faisalabad Chamber of Commerce & Industry (FCCI) and Pakistan-Afghanistan Joint Chamber of Commerce & Industry (PAJCCI) in their joint press conference have totally rejected the Anti-Export Federal Budget demanding that the proposed abolishing of Final Tax Regime and other anti-exports taxation measures are unacceptable which will turn disastrous resulting to decline in precious foreign exchange earnings, adversely affecting revenue generation for national exchequer and urban employment in millions, held today, simultaneously at Karachi, Lahore, Faisalabad, Sialkot & Multan.
The Chief Coordinator & Spokesman of All Exports Associations of Pakistan Muhammad Jawed Bilwani demanded that the Exporters from all over Pakistan have unanimously rejected the proposed imposition of Normal Tax Regime and abolishing Final Tax Regime for Exporters in the Federal Budget 2024-25 terming it “counterproductive” stating that this will create unnecessary hassle with uncalled-for involvement of FBR officials which may lead to open the gates of corruption. Presently, the 1% tax deduction under FTR is at source deducted electronically upon receipt of export proceeds, irrespective of profit or loss, without human intervention in a transparent manner.
The Export Associations lamented that neither the Finance Minister nor Chairman FBR or Commerce Minister has consulted the Textile Export Associations for Federal Budget Proposals 2024-2025. They questioned why the Government always squeeze the existing Tax Payers, especially, the Value-Added Textile Exporters? The exporters are earning Foreign Exchange for the Government, generating highest revenue for the Government, providing highest urban employment in millions. Any uncalled for adventure and unwise moves and steps by the Government in the Federal Budget will push the performing export sector towards disaster leading to massive unemployment causing law and order situation.
They lamented that the sitting Government has called some big industrialists for consultation only and have neglected the Associations and Chambers registered with Federal Commerce Ministry under DGTO. The democratic government is acting undemocratically with the exporters and business community of Pakistan, they opined.
The Export Associations were of the view that if the Government cannot bring and implement productive policies for enhancing exports, it should learn from the model of other countries in the region. If the Government replicates their policies and incentives, the exporters give assurances that the shall achieve new milestones of exports enhancements.
The Exports Associations of Pakistan voiced that the proposed shifting of Exporters from 1 percent turnover-based Final Tax Regime (FTR) to the standard taxation at 29 percent of taxable profit, would prove to be disastrous for the exports, hence, this proposal to remove exports from FTR must be dropped from the Finance Bill 2024 to prevent further deterioration of trade deficit and resulting pressure on foreign exchange reserves. Historically, the FTR has offered transparent mechanism for taxing export proceeds electronically irrespective of profit or loss on realization of their export proceeds. This imprudent tax measure has been proposed not with an intention to enhance revenue but to open up the doors of corruption and harassment in the hands of FBR. Pertinent to mention here that the Exporters are also contributing 0.25% as Export Development Surcharge.
The Exports Associations of Pakistan cautioned the Government that the unilaterally and arbitrarily imposition of harsh anti-export taxation measures without realizing the ground reality and taking on board the stakeholders Exports Association will cause the export businesses and industries to shut-down with huge decline in export, deterioration of foreign exchange earnings and massive layoffs occasioning to precarious law and order situation.
President KCCI Iftikhar A. Sheikh, President FCCI Dr Khurram Tariq, President SCCI Abdul Ghafoor Malik, President PAJCCI Junaid Makda also endorsed the point of view of exporters Association and assured that they were on the same page with Exporters Associations to uplift Pakistan’s export to earn valuable foreign exchange for Nation. They urged the Government to immediate address the grievances of exporters in the national interest.
The Exports Associations of Pakistan stated that Export is the only lifeline to save the Pakistan’s economy facing perils and unprecedented set of challenges in the wake of global slowdown and political wrangling and fiasco witnessed during last three years. Saving the Exports meanings saving economy of Pakistan. The Tax Advisors to the Government are misleading the high-ups at Islamabad that Exporters are earning very high profits. The reality is that the exporters do business on very nominal and narrow margin. The Government’s Tax Advisors may like to explain if export is such a profitable business then why the exporters number is decreased and export if facing a declining trend? Due to narrow profit margin, deprival of competitiveness, high cost of manufacturing for exports, the exporters have been shifting to other businesses. It is a total misconception that the exporters earn high profits.
The exporters also lamented that the proposal to eliminate zero-rating on local supplies under Export Facilitation Scheme (EFS) will have highly adverse effects on export. Removal of zero-rating on local supplies to registered exporters will compel the exporters to claim refunds of Sales Tax from FBR which is lengthy process contrary to the spirit of EFS. Already, billions of rupees Sales Tax Refunds are stuck-up with the Government. Therefore, this adverse proposal must also be dropped from the Finance Bill 2024. The Exporters file their Sales Tax Refunds electronically through FASTER system which are also processed electronically without human intervention and their claims are also disbursed electronically.
The exporters also rejected proposed investigative audits under section 25 of Sales Tax Act 1990 to confer extraordinary powers to FBR officials which aims to address tax fraud but increases regulatory burdens and the risk of misinterpretation, leading to frequent audits based on vague suspicions. This raises concerns about potential misuse and coercion by tax authorities, fostering an environment of uncertainty and fear that will defeat the efforts to broaden tax base and discourage new investment in such anti-business environment. Further, the definition of fraud has been changed, enabling the officials to seek records of up to 15 years to prove innocence in case of any allegation of fraud which would not be possible to comply as under the previous definition, taxpayers have been maintaining records for a maximum period of 6 years. Hence, this must be withdrawn forthwith, exporters demanded.
The export-oriented industries are already deprived of even level playing field to compete in the region after suspension of financial matrix of the Textile & Apparel Policy 2020-2025 with discontinuation of Duty Drawback on Local Taxes & Levies and Regionally Competitive Energy Tariffs (RCET). The NEPRA, from July 1, 2024, is also considering to increase fixed charges on power from present Rs 440/- & Rs. 500/- to Rs 2000/- and its heavy impact is harsh and needs to be eliminated for ease of doing business and regional competition, it must be done away with, exporters demanded.
They were of the opinion that the export industries are already facing tremendous and set of challenges as they are liable for multiple taxes for Federal Government, Provincial & Local Government, 18% Sales Tax, contribute in EDF 0.25 Export Development Surcharge, SESSI, EOBI, WWF having separate impact. Sales Tax and other Refunds are excessively delayed in the hands of FBR. The FBR violates its own laws and rules to release claims of refunds of exporters.
Pakistan is facing highest ever Cost of Manufacturing having huge impact on production and narrowing down profitability. The industry is also suffering owing to highest ever energy tariffs and costly industrial inputs which has made many segments of the industry unviable to operate. Five Export Sectors faced another fatal blow with discontinuation of Regionally Competitive Energy Tariffs (RCET) which has rendered the export industries uncompetitive and owing to huge increase in the cost of manufacturing and a large number of SMEs had closed their production with layoffs.
They articulated that proposed changes in tax regime for exporters will be counterproductive and the Government will suffer on multiple counts. It will result in drastic reduction in Pakistan’s Export revenue leading to a reduction in Pakistan’s foreign exchange earnings. Reduction in overall tax revenue which the industry pays, thus defeating the entire objective of increasing tax revenue. Due to lack of competitiveness faced by Pakistani Export Industry, the Export opportunities will be captured by other regional players like India, Bangladesh, Cambodia, Vietnam etc. This additional disadvantage from regional competitors will discourage further growth and expansion in export-oriented industry in Pakistan rather businesses and industries will be forced to explore new avenues of growth outside Pakistan.
Recently, it has also been highlighted in the print media that 50% of industrial units had shut-down their production. 20% to 25% membership of Textile Exporters Associations have also declined which tantamount to closure of those textile units which are mainly the SMEs. Apparently, the confidence of textile export industries over the Government is shaken which contributes to 8.5% of the national GDP and 60% share in foreign exchange earnings.
They expressed concern that it appears that now the Government wants to shift its responsibility to broaden tax base over exporters to further generate taxes and contribute revenue, instead of broadening the tax-to-GDP ratio which is the prime responsibility of FBR in which the Board has failed miserly. They urged that instead of increasing tax on Export Oriented value-added industry the Government must focus its energies and machinery to tap the tax potential of non-taxpayers who are not contributing to national exchequer resulting in extra burden on tax compliant taxpayers.
The Joint Press Conference of all export Associations from Karachi were represented by Muhammad Jawed Bilwani, Chief Coordinator, Value-Added Textile Forum, Iftikhar A. Sheikh, President KCCI, Dr Khurram Tariq, President FCCI, Abdul Ghafoor Malik, President SCCI, Junaid Makda, President PAJCCI, Abdul Jabbar Gajiani, Chairman PHMA SZ, Mian Farrukh Iqbal, Chairman NZ, Amanullah Khan, Sr Vice Chairman PHMA NZ, Musharraf Khawaja, Vice Chairman PHMA NZ,Ijaz Khokhar, Ex-Chairman PRGMEA, Syed Aasim Shah, Chairman APBUMA, Khawaja Usman, Chairman PCFA, Rafiq Godil, Chairman PAKSEA, Khurram Mukhtar, Patron In-Chief PTEA, Waheed Ahmed, Patron In-Chief PVFA, Naeem Khokhar, Chairman PCMEA, Qasim Mehmood, Chairman PGMEA, Yousuf Hassan Bajwa, Chairman SIMAP, Muhammad Zafar Iqbal, Chairman PAKFEA, Abdul Hannan, Chairman APMEPA, Arshad Latif Butt, PSGMEA, Muhammad Owais, Vice Chairman PRGMEA, Khurshid Alam, Vice Chairman TMA, Amanullah Aftab, Chairman PLGMEA, Abdus Samad, Ex-Chairman PCMA, Shoaib Majeed, Ex-Chairman PDMEA, Muhammad Shafi, Sr. Vice Chairman PTA, Danish Javaid, Ex-Chairman PBEA, Rafiq Suleman, Ex-Chairman REAP and large number of prominent textile exporters participated in the joint press conference.
