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Business Recorder
6 days ago
- Business
- Business Recorder
US tariff relief offers boost, but Pakistan's high production costs still hamper exports
The United States has lowered its reciprocal tariff rate on Pakistani goods to 19%, compared to the 20–25% imposed on regional competitors such as India, Bangladesh, Vietnam, and Sri Lanka—offering a potential edge in the US market, which underscores the impact of Pakistan's diplomatic efforts to secure more favorable trade terms. However, this win may fall short of delivering substantial export gains unless Pakistan addresses persistent structural issues at home. Industry leaders and economists warn that high input costs—stemming from steep interest rates, costly energy tariffs, and reduced export financing incentives—continue to undermine the country's global trade competitiveness. 'The price of electricity remains the second-highest component after cotton in Pakistan's textile production costs,' said Jawed Bilwani, President of the Karachi Chamber of Commerce and Industry (KCCI). Textile exporters alarmed by 19pc US tariff decision He added that recent changes to the Export Finance Scheme (EFS) have also dampened export momentum. 'Retaining the EFS in its original form is vital for sustaining textile exports,' he emphasized. According to Dr. Usama Ehsan Khan, Head of Research at the Policy Research and Advisory Council (PRAC), despite the lower US tariff, Pakistan may not see a significant shift in orders from global buyers unless input costs are brought down. 'The tariff cut helps retain volume in the US market, but high production costs keep Pakistan's export prices uncompetitive,' he said. Khan pointed to three critical areas for immediate cost reductions: interest rates, power tariffs, and gas prices. He noted that Pakistan's central bank has kept its policy rate at 11%—well above inflation, which has recently fallen below the targeted 5–7% range. Peer economies, by contrast, are operating with rates between 3% and 10%. 'There's room for Pakistan to bring interest rates into single digits,' Khan said, arguing that such a move would lower the cost of doing business, spur exports, and ease debt servicing. 'Every 1% cut in the policy rate reduces interest payments by Rs200–250 billion annually,' he added. Power tariffs for Pakistani exporters, currently around $0.16 per unit, are also significantly higher than those in competitor countries, where rates range from $0.06 to $0.10. Khan suggested that Pakistan could lower electricity costs by shutting down expensive local plants and renegotiating contracts with foreign-owned independent power producers (IPPs). Gas tariffs, another burden on exporters, also require downward revision, he said, noting that a strategic reduction would enhance Pakistan's appeal as a manufacturing hub. A joint PRAC and KCCI infographic comparing Pakistan's input costs with those of regional competitors reveals further weaknesses. Pakistan's labor productivity, for instance, stands at just $7.20 in GDP per hour worked—well below the $8.70–$18 range of peer countries, except Cambodia, which stands at $4. As global trade dynamics shift and buyers seek reliable, cost-effective sourcing destinations, experts stress that Pakistan must enact bold domestic reforms to fully capitalize on external trade opportunities like the US tariff cut. 'Without reducing production costs, Pakistan risks missing out on the benefits of this hard-earned trade advantage,' Khan cautioned.
Express Tribune
03-08-2025
- Business
- Express Tribune
11,000 taxpayers sent 'nudging' notices
FBR has served 'nudging' notices to nearly 11,000 companies and individuals, advising them to fix anomalies in their last sales tax returns Listen to article The Federal Board of Revenue (FBR) has served 'nudging' notices to nearly 11,000 companies and individuals, advising them to fix anomalies in their last sales tax returns or be ready for consequences such as penalties, freezing of bank accounts, and sealing of businesses. The notices were issued last month in the middle of negotiations between the business community and the government, underscoring the authorities' resolve to recover due sales and income taxes from individuals and companies. FBR Chairman Rashid Langrial believes that existing taxpayers are paying far less than their due taxes. He has begun applying a risk management system to identify loopholes in the tax returns filed by these entities and individuals over the past five years. Sources said that in the first phase, about 11,000 nudging notices were served by corporate tax offices in Karachi, Lahore, and Islamabad. Traders in Karachi and Lahore also observed a strike last month against the government's decision to give arrest powers to the FBR and add back half of over Rs200,000 in cash expenses in income tax calculations. When contacted, the FBR said these "non-intrusive and legally non-binding nudging notices" were served to encourage behavioural and social changes among taxpayers. "Please correct anomalies in your sales tax return. Your failure to act will be viewed as a choice not to comply," cautioned the FBR in its notices to companies and individuals in Lahore. The FBR warned that failure to address anomalies and file accurate returns in the future could lead to financial penalties, placement of FBR staff within businesses for monitoring, and best judgment assessments by tax commissioners, which can result in heavy fines. It also advised thousands of people that their bank accounts could be frozen and business premises sealed for non-compliance. Taxpayers were informed that the FBR used advanced data analytics to examine returns and benchmark them against peer businesses and jurisdictions. The analysis was fully automated without human involvement. The FBR said that for the tax years 2019 to 2024, its system identified anomalies in 2024 returns. These included unusually high sales claimed as exempt or under reduced-rate categories and low value addition based on the comparison of sales to purchases. "To avoid enforcement actions, ensure that these anomalies do not reoccur in subsequent returns and file correct sales tax returns for the upcoming due periods," the FBR cautioned. Jawed Bilwani, President of the Karachi Chamber of Commerce and Industry (KCCI), criticised the FBR's decision to serve notices during ongoing talks. He said many KCCI members received notices without any prior awareness campaign. Bilwani also criticised the FBR's method of comparing one shop's sales patterns with competitors', arguing that sales and value addition depend on brand and quality and are not uniform. "A customer may buy a shoe for Rs100 or Rs1,000. The FBR has no right to treat both values the same," he said. The FBR, however, claimed that nudging notices helped increase the number of returns filed in July. A final analysis will be made after the extended filing deadline ends on August 4. In another type of nudging notice, the FBR warned that reduced-rate sales were unusually high relative to domestic sales, with many sales claimed as exempt or under reduced-rate categories instead of taxable. "Your reported output tax is significantly lower than expected for businesses in your sector and location," the notice stated. However, the business community argued it is unjustified to compare similar businesses without accounting for differences in efficiency, cost structures, and management. The FBR also flagged excessive refund requests stemming from high input tax claims and an unusually high number of credit and debit notes. "Please correct anomalies in your sales tax return to avoid strict enforcement actions," stated another notice. The FBR added that enforcement actions, such as posting inspectors at business sites, particularly in cement factories, have significantly improved collections despite low sales. The FBR chairman has also transferred over 250 tax officers from grades 17 to 22 as part of a strategy to place only A and B category officers, as classified by various agencies, in key field positions.
Business Recorder
02-08-2025
- Business
- Business Recorder
Customs Rules: PHMA expresses concern over draft amendments
KARACHI: Pakistan Hosiery Manufacturers & Exporters Association (PHMA) has taken strong notice to the FBR's notification issued vide SRO 1359(I)/2025 dated 29th July 2025 proposing draft amendments in Customs Rules 2001 to introduce draft amendments in Rule 871, 872, 876, 877, 879, 880, 882, 883 & 885 which will defeat the objective and purpose of Export Facilitation Scheme to provide a level-playing field, competitive and enabling environment to exporters to ease down their liquidity pressure and facilitate their cash-flow so that they may get new orders to enhance their exports. In a letter to Shah Faisal Secretary (Export Policy) Federal Board Revenue (FBR), Jawed Bilwani Patron in chief PHMA, Central Chairman Muhammed Babar Khan and Chairman South Zone Faisal Arshad Shaikh said that the proposed amendments tantamount to imposition of taxes and levies mainly on import of cotton yarn and grey cloth on import-stage by excluding the same from the scope of Export Facilitation Scheme. Approval and implementation of said draft amendments will shatter the hard enterprise of exporters to enhance exports, shall lead to decline in export and foreign exchange earnings due to liquidity crunch and in-competitiveness. Continuation and implementation of Export Facilitation Scheme (EFS) in its Original status and position prior to Federal Budget 2024-2025 is inevitable and lifeline to enhance national exports and the proposal of imposing taxes and duties at the import-stage for importation of materials to manufacture goods meant for exports will sabotage apparel and textile exports. In view of this PHMA conveys strong objection on subject draft amendments which are harsh and anti-export and not acceptable in order to safeguard the value-added apparel & textile exports. Any decision taken by the FBR/ Government arbitrarily and without consultation of Value-Added Apparel and Textile Exporters Association will lead to serious repercussions and will cause decline in national exports and foreign exchange earnings. PHMA further requested to immediately call broad-based meeting of all Value-Added Apparel & Textile Exporters Associations in this regard. They noted that PHMA was established in 1960, holds the distinction as premier and largest Trade Organisation representing more than 1200 exporters of Value-Added Apparel - Hosiery / Knitwear products having Association's offices in Karachi, Faisalabad, Lahore and Sialkot. The Hosiery/ Knitwear Sector alone earns approx. USD 5 billion annually for the country which includes knitted products of T-Shirts, Trousers, Hoodies, Socks, Bed-sheets, Dyed Fabric etc. and provides huge urban employment. The Hosiery/ Knitwear exports rank among top-export in the total textile as well as national exports. Copyright Business Recorder, 2025
Business Recorder
25-07-2025
- Business
- Business Recorder
Taxpayers: KCCI tells Senate body FBR can't be judge, jury and executioner
ISLAMABAD: Karachi Chamber of Commerce and Industry (KCCI) Thursday categorically conveyed to the Senate Standing Committee on Finance on Thursday that the business community cannot allow Federal Board of Revenue (FBR) to simultaneously be the judge, jury and executioner of taxpayers. The Senate Standing Committee on Finance and Revenue, chaired by Senator Saleem Mandviwalla, met Thursday to discuss the anomalies in Financial Budget 2025-26. The Committee had an extensive discussion on several anomalies in the Financial Budget 2025–26. Members of the Chambers of Commerce briefed the Committee on these anomalies, with specific focus on the clauses granting powers to the FBR to arrest on the basis of suspicion. They warned the Committee about the potential misuse of such clauses for the harassment of the business community. KCCI slams FBR for its 'authoritarian' conduct, 'indifference' In a presentation before the committee, President Karachi Chamber of Commerce & Industry (KCCI) Muhammad Jawed Bilwani highlighted that FBR has authorized Inland Revenue officers to arrest directors, CEOs, CFOs, and individuals involved in tax fraud under Section 37A of the Sales Tax Act, 1990. We cannot allow FBR to be the judge, jury and executioner of tax payers. This is a democratic country where citizens rights are protected by the judiciary. This act will cause harassment and corruption on a level unseen before eventually leading to taxpayers closing their legitimate businesses, moving their Investments abroad and Ease of doing Business Index sinking. To an all time low. The whole point of this law is to catch people who issue fake or flying invoices so is it not easier to simply specify this law for this specific offence. Jawed Bilwani further specified that the Definition of tax fraud is too vague and extremely open ended and there are apprehension of its abuse. Therefore, the said definition be restricted to make it applicable only in cases of issuance of fake and flying invoices. President KCCI stated that the new section14AE gives FBR very scary powers to force taxpayers into registering for sales tax. This law should be made softer in stance and powers need to be curtailed to an understandable extent. The language of this law will scare anyone even thinking of registering as a Sales Tax filer from entering the regime. This is a classic example of carrot and stick. We do not endorse this measure and urge FBR to have a more reasonable approach. Jawed Bilwani added that e-bilty should be removed under section 40C to remove local transfer of goods within Pakistan from this act. Digital invoicing should be implemented in a phase wise manner starting from multinationals and Public Limited entity with a Turnover in excess of Rs10 billion and then moved to the medium and ultimately small sized taxpayers with respect to turnovers. The system should be made absolutely free. Currently only one integrator certified by FBR is free while others are at cost. Copyright Business Recorder, 2025
Express Tribune
19-07-2025
- Business
- Express Tribune
Islamabad traders defy strike call
The shutter-down strike call given by some trader groups against the Federal Board of Revenue's (FBR)'s expanded powers had little to no impact in Islamabad, where business activities continued as usual on Saturday. The federal capital witnessed uninterrupted commercial activity, with residents engaged in routine shopping throughout the day. All major markets, shopping malls, commercial centres, and supermarkets — including Jinnah Super, G-9 Markaz, Blue Area, G-10, and I-8 — remained open, and stores operated normally. Neither the Islamabad Chamber of Commerce and Industry (ICCI) nor any major traders' alliance announced participation in the strike call given by Karachi and Lahore chambers against tax measures and arrest powers of the federal tax authority. According to the Chamber, recent negotiations with the government addressed the concerns of the business community, and assurances were given to resolve key issues. As a result, the decision was made to keep businesses open in Islamabad. In other parts of the country, however, factions of the trader community did call for protests and strikes, citing concerns over the FBR's increased powers, particularly the crackdown on non-filers and the broad authority granted to field officers to conduct raids. These measures, they argue, are fuelling uncertainty and distrust among business owners. Nevertheless, no strike-related closures or demonstrations were reported anywhere in Islamabad. On Friday, talks between the government and the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) had concluded on a positive note, calling for the postponement of the nationwide shutter-down strike initially scheduled for Saturday. However, Karachi Chamber of Commerce and Industry (KCCI) maintained its call for a strike, citing unresolved concerns with the Finance Act 2025. A special committee was formed to address the grievances of traders regarding the controversial Finance Act. The committee, chaired by Prime Minister's Special Assistant on Industries, Haroon Akhtar, convened with representatives from various chambers of commerce to discuss the amendments in the act. The negotiations saw progress, with a consensus reached on several amendments. Among the most notable changes was the decision to remove Clause 9 of the act, which had been a key point of contention for traders. A proposal to amend Article 37A was also tabled, with the government agreeing to review it further. Despite these developments, KCCI President Jawed Bilwani expressed that while their demands were largely accepted, no written assurance was provided. In contrast, the FPCCI, led by Atif Ikram Sheikh, reached an agreement with the government to call off the nationwide strike. He thanked the authorities for their serious engagement and expressed hope that the prime minister would approve the proposed amendments. Effect in other cities Meanwhile, the strike led to widespread partial and complete market closures across Pakistan on Saturday. The strike divided traders into opposing camps. Major business centres in Karachi, Lahore, Hyderabad, Quetta, Peshawar, and several smaller cities observed shutdowns.
