PBEA suggests tax benefit to exporters against depreciation

The Pakistan Bedwear Exporters Association (PBEA) has suggested that the exporters should be allowed to claim tax benefit against the depreciation and interest cost incurred by them on making investment in modernisation of production facilities.
PBEA founder Chairman Shabbir Ahmed, in a fax to Commerce Minister Humayun Akhtar, has said that the advent of post-quota era is expected to bring major changes in the textile sector mainly in terms of new investment.
In the new era, countries with comparative advantage in a sector would be able to perform better, he said. Shabbir said Pakistan was among the producers of cotton and possessed not only a comparative advantage for the textile industry but also faced stiff competition.
Keeping in view of the requirements of the new era, the textile sector underwent investment to the tune of four billion dollars, he said, adding the prime objective of this investment was to increase economies of scale and thereby reduce cost.
However, he felt that the present fiscal regime was not favourable for the investment being made by the exporters.
Elaborating, Shabbir said that presently exporters were assessed on the basis of final tax regime (FTR) under which the tax deducted at source from the export proceeds was the full and final discharge of tax liability.
Under the system, he said, the exporters were denied any benefit for additional investment made by them. In view of the special circumstances prevailing in the textile sector, it was essential that the exporters should be allowed some relief towards their tax liabilities to enable them to fare better in the post-quota era, he added.
Shabbir suggested that this object could be achieved if the exporters should be allowed to claim tax benefits against their investments or to reduce their prevailing FTR rate to 0.25 percent.
The PBEA Chairman said that the concession provided to the exporters would encourage people to make more investment in the industry, bringing more revenue to the government both in local currency and in foreign exchange.