PHMA Strongly Rejects FBR Misconceptions on Exporters’ Tax Payments

The controversy arose after officials briefed

the IMF and parliamentary committees

that exporters pay minimal taxes

Business Reporter

Karachi: The Pakistan Hosiery Manufacturers Association (PHMA) has strongly reacted to recent misconceptions spread by the Federal Board of Revenue (FBR) regarding exporters’ tax liabilities. The controversy arose after officials briefed the IMF and parliamentary committees on budget discussions, incorrectly suggesting that exporters pay minimal taxes.

PHMA Chairman clarified that value-added apparel and textile exporters under the Normal Tax Regime (NTR) in FY25 are paying over 45% taxes, a significant increase from the previous Final Tax Regime (FTR) where taxes ranged from 25% to 33.3%, based on profit margins. The claim that exporters pay only 1% fixed tax is false. Under FTR, exporters paid 1% tax on export proceeds plus 0.25% Export Development Surcharge (EDS), totaling 1.25%, deducted electronically at source.

Now, under NTR, exporters pay a combined 2.25% tax on export proceeds, including minimum and advance tax plus EDS, alongside more than 45% additional taxes on profits. PHMA highlighted that the NTR has increased corruption risks within FBR due to manual interventions, unlike the automated deductions under FTR.

The Chairman criticized the imposition of super tax and triple taxation on exporters, emphasizing liquidity issues caused by delayed sales tax refunds and non-refundable minimum tax on losses. He urged the government to maintain the original Export Facilitation Scheme and focus on expanding the tax base by targeting non-taxpayers, rather than burdening compliant exporters. Failure to do so may worsen Pakistan’s trade deficit, reduce export revenue, and harm foreign exchange earnings.