Falling exports: APTMA urges implementation of zero-rated tax regime

Statement comes a day after trade data showed plunge in exports

KARACHI: A day after trade statistics showed a 7% decline in exports, All Pakistan Textile Mills Association (APTMA) Chairman Tariq Saud urged Finance Minister Ishaq Dar to implement the zero-rated tax regime in letter and spirit.

The government and representatives of the textile industry agreed to resume zero-rated regime to streamline textile exports that have been declining due to domestic as well as international factors.

“It is regretful that the said agreement is being twisted by some elements, which instead of helping the smooth running of the textile industry and promoting exports, has brought it to a volatile situation,” said Saud, adding that this would lead to the collapse and imminent closure of the industry.



Dar in his budget speech 2016-17 announced that the zero-rated tax regime would be implemented for five major export-oriented sectors including textile, carpet, leather, sports goods and surgical industries from the next fiscal year.

The news was welcomed by the textile mills and other sectors that had been lobbying for the measure for years. Up until a few years ago, these sectors were exempted from numerous taxes by a zero-rated tax regime, however, the regime was called into question in a plea that argued that exporters had been selling their (tax protected) goods in the domestic market as well.

The somewhat convoluted solution was to start taxing these sectors and to offer refunds upon verification of export receipts.

However, then another problem presented itself.

These refunds were blocked by the Federal Board of Revenue (FBR); at times for more than a year, which led to a chronic liquidity crunch that severely hampered the working capital requirements of the sectors.

Keeping in mind the decline in exports, it was predicted that the zero-rated regime would be resumed.

Their confidence was further bolstered when Prime Minister Nawaz Sharif, on February 13, committed to resuming the old regime come fiscal year 2017.

But there was uncertainty up until a few days before the budget was announced because the FBR opposed the proposal.

Published in The Express Tribune, August 12^th, 2016.

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