Additional tax on incomes, profits, gains: Textile exporters term move ‘harsh’, ‘anti-business’

KARACHI: The value-added textile exporters on Wednesday expressed concerns over “additional tax” on income, profits and gains and rejected the government’s move by terming it “harsh” and “anti-business.”

They complained that the exporters are already burdened with high operational cost of manufacturing after the PDM government discontinued Regionally Competitive Energy Tariff (RCET).

Besides, the government has also suspended Duty Drawback on Local Taxes and Levies under National Textile and Apparel Policy 2020-2025, leaving the “textile export uncompetitive,” they said.

July-May textile group exports fall 14.72pc to $15.029bn YoY

A super tax was imposed for one year in the past, which the new fiscal budget also proposes for another term, which they called “unfair” for export business.

Exporters continue to face scores of “unprecedented” challenges over the past one year since the PDM rule took over, they said.

The country’s economic “turmoil” made manufacturer costs “too high” to afford for the export, besides leaving it “unviable” on the world markets, they said.

“Further burdening the exporters with additional tax burden will compel them to shift their industries abroad resulting massive flight of capital and unemployment,” they added.

The government should refrain from the proposed the “additional tax on income, profits and gains” u/s 99D, Muhammad Jawed Bilwani, Chairman, Pakistan Apparel Forum said.

“Any income on which income and super tax have already been levied at a prescribed rate under normal course of business should not be further burdened with additional tax under proposed Section 99D,” he said.

Exporters, who might have accrued exchange gains on a particular transaction does not necessarily mean additional income or a gain for the whole year since they are facing a number of cost-increase factors, he added.

Such factors also include: Buyers demand prices reduction on the rupee devaluation; loss from non-receipt of DLTL and late receipt of tax refunds under FBR’s FASTER system for which working capital has to be financed at exorbitant interest rates.

Lastly, he said that an abrupt discontinuation of RCET takes place with an immediate rise in energy and other input costs following every devaluation.

“At least 918 exporters have since gone out of export business due to incurring losses on account of above factors,” he said.

The overburdening of taxation is feared to force a huge number of exporters to close down their units, which will resulting in further fall in exports, he said.

Bilwani said: “Exporters have already opposed this proposed imposition and agitated to the Anomaly Committee to recommend and delete the proposed section.”

He demanded that the proposed section should be deleted because any income, on which tax under normal course, has been levied, should not be taxed again.

He said the existing rates of income tax are already too high and the further taxation will burden export sector.

Copyright Business Recorder, 2023