Pakistani Exporters to be Further Choked with the New Tax Regime

Pakistani exporters besides the political instability sparked off by several terror attacks across the country will have to survive another scare of a new bill which has been proposed to end the presumptive tax structure on its exports. Currently, under the presumptive tax regime the exporters have to pay just the bank deduction of one percent tax while realizations of foreign exchange on the total export merchandise.

The finance bill of 2009 tabled a proposal to amend sub-section (4) of Section 134 by substituting the tax deducted as a "minimum tax" which was hitherto deemed as a "final tax". In short, if the bill is passed, the exporter will have to carry the burden of a new tax regime which would be based on commodity and its volume.

Apart from the amendment, in regards with exports to Afghanistan which is normally against cash, the proposed Bill has also introduced a new sub-section (3c) authorizes customs to collect tax at the time of clearance of goods exported at one percent of the gross amount of such goods.

The bill aims at streamlining the tax system especially by legislation that could bring all transactions under the tax net, and thereby to increase export tax revenue of the country. Hereafter, the exports without a letter of credit against a contract for which payment may be tendered through non-banking channels needed to be brought within the tax net.

Though there is no evaluation conducted on the pros and cons of the provision of "final tax" that has been in effect since 1992, exporters fear that in the present circumstances it would be hard to sustain in the market with any extra liabilities. Industry experts averred that taking into account the falling global demand for most goods any such move would only serve as a roadblock to export earnings of the country.

By Jose Roy