LAHORE: The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has urged the Federal Board of Revenue (FBR) to strengthen the industry and export sector by releasing their sales tax refunds timely, instead of sending them audit notices, as more than 51% tax revenue is collected from manufacturing sector, though its GDP share is just 13%, while the agri sector, which constitutes more than 26% of the GDP, is not fulfilling its national obligation, contributing mere 2% of the tax income in the country.
PRGMEA Central Chairman Mubashar Naseer Butt suggested the government to enhance its tax revenue by widening tax base and bringing the agri sector in tax net instead of holding the sales tax refunds of textile exporters who earn valuable foreign exchange.
The FBR, instead of facilitating the industry, which helps it to collect tax revenue through withholding taxes, creates problems for manufacturers as well as the exporters, he added. He said the commitment of the FBR to instantly release exporters’ tax refund claims through FASTER System seems to be just an eyewash, as the tax collectors, instead of releasing timely refunds, have started sending audit notices to the exporters to refrain them from demanding their own payment. He maintained that on average 10 audit notices are being served to almost every exporter, who presently needs payment but fed up over the long delays of their refunds.
While Pakistan needs to widen its tax base to improve collection, it also needs to make the tax burden more equitable across sectors. Presently, Pakistan overburdens its manufacturing sector with taxes, while agriculture and services are taxed at low levels.
Mubashar Butt said that the agriculture sector enjoys virtually zero taxes. While agriculture had a 26% GDP share, its contribution to the tax net was documented as only 2%. This skewed tax burden on the manufacturing sector has discouraged the growth of the manufacturing industry required urgently by Pakistan. Not only has this policy of uneven taxation across sectors prevented higher tax collection from certain sectors within the economy, but it has also discouraged industrial growth.
PRGMEA Vice Chairman Waseem Akhtar observed that the value-added textile exporters are facing severe liquidity crunch and they need the refunds payment in time. It’s a question of survival amidst acute liquidity crunch and we need the help of the government to save the industry from bankruptcy by releasing its refunds, he appealed.
Wasim Akhtar said that the PRGMEA has been approached by various members informing that they have been facing inconvenience owing to delay in refunds payment despite the fact that their refund payment orders (RPOs) were generated as well as approved.
Waseem Akhtar also called for ease of doing business, lowering cost of production, solution of liquidity crunch through early refunds payment, long-term and consistent energy tariff policy and relaxed import policy for industrial raw materials so that industrialization could be promoted and exports could be enhanced.
He noted that that the situation has worsened due to continued political unrest, import restrictions, and an unchecked dollar increase. These factors have increased inflation, undermined the rupee, driven up yarn prices, driven up the cost of electricity per unit, and, most importantly, harmed business confidence, he added.
He shown his concern over the cancellation of competitive power tariff of Rs 19.90 per unit for the value-added textile export sector, expressing fears that discontinuation of the facility will hurt the economy.
PRGMEA vice chairman said that the cancellation of the regionally competitive power tariff will lead to further decline in textile and the total national exports, terming the withdrawal as very alarming and unfortunate to have a disastrous impact on the cost of manufacturing of goods meant for exports.
He said that the existing manufacturing cost is already higher in Pakistan as compared to the competing countries, as the Pakistani exporters’ deals fetch a very narrow margin of 2 to 3 percent. PRGMEA Central Chairman Mubashar Naseer Butt maintained that Pakistan’s current economic crisis did not happen overnight.
Copyright Business Recorder, 2023
Comments
Comments are closed.