ISLAMABAD: The Reforms & Revenue Mobilization Commission (RRMC) has recommended the Ministry of Finance to impose a tax on exporters who are not bringing foreign currency within a specified time period.
The budget proposal of the RRMC for 2023-24 revealed that an income tax has been proposed on exporters not bringing foreign currency within a specified time period, and resultantly earning a gain on foreign exchange.
The said gain can be computed as the difference between the foreign currency rate prevailing after a specified number of days of the export, and the conversion rate on the date when the foreign currency is repatriated to Pakistan. As such, it is pertinent to mention here that the task to collect this levy is proposed to be assigned to the State Bank of Pakistan, as the FBR is not privy to the details of these transactions as they occur.
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This measure has been proposed to tax the exporters that hold back foreign exchange in anticipation of the devaluation of the Pak Rupee against other international currencies and resultantly earning a gain on their foreign exchange. The revenue impact is estimated to be positive for the government.
The RRMC further recommended that Pakistan’s economy heavily relies on exports, and as such, the government has been taking various measures to promote and incentivize exports. One such measure is the final tax regime (FTR) regime for exporters. It is recommended that the FTR scheme for exporters should be shifted to a Minimum Tax Regime (MTR) scheme in the first phase, so as to encourage documentation.
In 29 the next phase, exporters should be allowed to avail 100% tax credit subject to certain conditions, similar to the provisions under the law for Non-Profit Organizations (NPOs). To avail this benefit, exporters must maintain proper documentation and comply with relevant government regulations.
The proposed MTR scheme can promote documentation in exports and incentivize exporters to maintain proper financial statements, ultimately leading to a more transparent and inclusive economy. This scheme can also help the government increase tax revenue, bringing in much needed funds towards public services and development projects, it added.
Copyright Business Recorder, 2023