Tax measures needed to support Pakistan's textile sector

The Federal Board of Revenue (FBR) has the potential to support exporters in these difficult times, said World Bank’s Programme Lead Public Sector Specialist Clelia Rontoyanni.

Addressing a consultative dialogue on “Textile sector’s competitiveness amid Covid-19” on Tuesday, she highlighted various aspects of support for competitiveness in textile businesses.

Experts from public and private sectors, who participated in the dialogue, remarked that facilitation and appropriate taxation measures could play an instrumental role in enhancing the competitiveness of textile businesses and boosting exports.

“In the recent past, several new measures have been introduced by the FBR including the reduction in sales tax rate, customs duty and ease in filing tax returns that may help in improving the cash flow of exporters,” said Rontoyanni.

“Tax authorities need to realise that two-thirds of imports are inputs for the manufacturing sector and therefore tariffs on inputs should be lowered.” The World Bank official added that the tax system should be predictable and responsive to needs of the private sector.

Sharing his observations, FBR’s former member Mohammad Raza Baqir said the textile sector was transitioning towards production of value-added goods. Covid-19 had adversely impacted the sector, hence, measures should be taken to facilitate it and overcome the unprecedented challenge, he said.

Another former FBR member Raana Ahmed suggested that in view of Covid-19, the FBR could consider relaxing the burden of direct taxes on the textile sector.

She said the current tax policy formulation process was weak and capacity for in-depth research in the FBR seemed to be lacking.

Sustainable Development Policy Institute (SDPI) Joint Executive Director Dr Vaqar Ahmed argued that the data regarding request for tax refunds should be made public and online as it would allow everyone to get a clear picture of the exporters’ refunds and in case there were delays.

He said the FBR could step up advocacy and outreach to help the private sector become aware and avail itself of the exemption schemes allowed for imports.

Published in The Express Tribune, August 12^th, 2020.

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