- Fruit and Vegetable Exporters oppose new tax proposal
While giving details to Pakistan & Gulf Economist, Mr. Waheed Ahmed, Patron-in-Chief of the Pakistan Fruit and Vegetable Exporters Association said, ‘The Federal Government has proposed to levy 29% tax on export earnings in the financial year budget 2024-25 instead of full and final withholding tax of 1% under the fixed tax regime. The Pakistan Fruit and Vegetable Exporters Association strongly rejects this proposal and warns the Federal Government that putting the exports under the normal tax regime by abolishing the fixed tax regime will have a very serious impact on the economy of Pakistan.
Abolition of the fixed tax regime will significantly reduce exports, closure of export units will lead to widespread unemployment, the government’s tax revenue targets will not be met, shortage of foreign exchange will further depreciate the rupee and above all, the agricultural sector, which is the backbone of Pakistan’s economy and the employment of millions of agricultural professionals will be at risk.
With the strenuous efforts of the Pakistan Fruit and Vegetable Exporters Association, the export of fruits and vegetables from Pakistan has reached $700 million, which we are trying to enhance to $1 billion and then to $3 billion in the next five years.
The biggest challenge for the agriculture and horticulture sector is the impact of climate change, leading to food shortages not only for export but also to meet local demand. Another major problem the horticulture sector is facing is rising costs, which makes it increasingly difficult for us to compete in the international market. We were strongly anticipating that the government would provide a big relief package for the agriculture sector, especially the horticulture sector keeping the challenge of climate change in view. Although the government made claims of economic recovery and stability, it was disappointing that the agriculture sector was completely ignored in the budget!
All Pakistan Fruit and Vegetable Exporters Association(PFVA) is fully focused on exploring new international markets for Pakistan, marketing, packaging and modernising processing and improving the quality of fruits and vegetables. In the case of the 29% tax imposed on export income in the Federal Budget 2024-25, the focus of exporters and PFVA will be diverted from the main goal of enhancing the export of fruits and vegetables from Pakistan since they will spend more time in maintaining records of income, expenditure and profit.
If the proposed 29% tax on exports is implemented in the Federal Budget 2024-25, it will be difficult to maintain the current level of exports of fruits and vegetables and the exports will certainly decline in the same year as it will be difficult for our members to materialize export orders due a situation of uncertainty which has arisen. The issues likely to be encountered in the implementation of the proposal of a 29% tax on export income in the Federal Budget 2024-25 include the following difficulties:
— The biggest problem in the implementation of the proposed 29% tax in the Federal Budget 2024-25 is the tax exemption on the agricultural sector and the large proportion of cash-based transactions. 90% of farmers in Pakistan are small-scale farmers who have tax exemption or zero rate facility. These farmers are neither registered with the FBR nor issue any invoices to exporters nor issue receipts for purchases or payments and thus it is impossible to establish a money trail of expenditure.
— It is important to mention here that in the fixed tax regime exporters have to pay 0.25% as Export Development Fund(EDF) besides withholding tax of 1% of export turnover in addition to 0.25 to 0.35% bank charges which constitutes 1.85% of the total turnover. The PFVA has since day one opposed the proposal to abolish a 1% fixed tax on exports and levy a 29% tax as we believe that taxpayers will face harassment from the tax authorities as this would open a door for corruption and bribery. A new chapter of taxation will begin and all the “productive energy” of the exporters will be spent on calculating the tax leading to an increase in the cost of doing the business.
— The PFVA is of the view that the abolition of the fixed tax regime and proposal of a 29% tax on export profits in the budget 2024-25 is not in favour of Pakistan keeping the current disappointing economic conditions in view.
— Pakistan’s export industry is already suffering from cost pressure and cannot bear such a severe blow.
— We fully support increasing the tax net and the revenue of the government but paying the price in the form of destruction of the export industry which is like losing the entire trade.
— The PFVA strongly condemns the exclusion of exports from the fixed tax regime and calls upon all the parliamentary parties of Pakistan to raise their voices against this ‘cruel’ proposal at the level of the parliament and the government to reconsider the same and recommends maintaining a fixed tax system.