Fair share of taxes: PHMA objects to FBR's claim
KARACHI: The Pakistan Hosiery Manufacturers & Exporters Association (PHMA) Chairman Muhammad Babar Khan has strongly objected to what he calls a misleading impression by the Federal Board of Revenue (FBR) that exporters do not pay their fair share of taxes. This claim, reportedly shared with the IMF and in parliamentary budget sessions, is 'untrue and damaging,' he said.
Babar Khan clarified that under the current Normal Tax Regime (NTR), apparel exporters are paying significantly higher taxes—over 45 percent—compared to the previous Final Tax Regime (FTR), where taxes ranged from 25 percent to 33.3 percent based on profit margins. He explained that under FTR, exporters paid a one percent fixed tax plus a 0.25 percent Export Development Surcharge (EDS), deducted automatically.
Now under NTR, exporters pay a one percent minimum tax and one percent advance tax, plus the 0.25 percent EDS—totaling 2.25 percent on export proceeds at the time of realization. Additional taxes are levied on profits annually, increasing the total tax burden.
He warned that the manual processing in NTR has increased opportunities for corruption, contrasting it with the automated deductions under FTR. Exporters also face super tax and minimum tax even in loss-making years, with refunds delayed for months—causing severe liquidity issues.
PHMA raised concerns over government plans to impose Sales Tax at the import stage under the Export Facilitation Scheme (EFS), saying this would worsen exporters' financial strain as sales tax refunds are already delayed.
The association urged the government to retain the original EFS provisions, including the zero-rated status for local purchases under SRO 957(I)/2021, to support competitiveness and ensure smoother operations across the textile value chain.
Babar Khan warned that current policies would hurt exports, widen the trade deficit, and reduce foreign exchange earnings. He called on the government to focus on bringing non-taxpayers into the tax net rather than penalizing compliant exporters.
Copyright Business Recorder, 2025
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