Fair share of taxes: PHMA objects to FBR's claim
Babar Khan clarified that under the current Normal Tax Regime (NTR), apparel exporters are paying significantly higher taxes—over 45 percent—compared to the previous Final Tax Regime (FTR), where taxes ranged from 25 percent to 33.3 percent based on profit margins. He explained that under FTR, exporters paid a one percent fixed tax plus a 0.25 percent Export Development Surcharge (EDS), deducted automatically.
Now under NTR, exporters pay a one percent minimum tax and one percent advance tax, plus the 0.25 percent EDS—totaling 2.25 percent on export proceeds at the time of realization. Additional taxes are levied on profits annually, increasing the total tax burden.
He warned that the manual processing in NTR has increased opportunities for corruption, contrasting it with the automated deductions under FTR. Exporters also face super tax and minimum tax even in loss-making years, with refunds delayed for months—causing severe liquidity issues.
PHMA raised concerns over government plans to impose Sales Tax at the import stage under the Export Facilitation Scheme (EFS), saying this would worsen exporters' financial strain as sales tax refunds are already delayed.
The association urged the government to retain the original EFS provisions, including the zero-rated status for local purchases under SRO 957(I)/2021, to support competitiveness and ensure smoother operations across the textile value chain.
Babar Khan warned that current policies would hurt exports, widen the trade deficit, and reduce foreign exchange earnings. He called on the government to focus on bringing non-taxpayers into the tax net rather than penalizing compliant exporters.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Express Tribune
15 hours ago
- Express Tribune
Salaried class paid Rs555b in FY24
Listen to article Salaried individuals have paid a staggering Rs555 billion in income tax in the last fiscal year, which were Rs188 billion more than the preceding year and also 100% more than the combined taxes paid by retailers and real estate sector. The record-high contributions by people, who pay income tax on the gross salaries without having the luxury to adjust their expenses, substantially reduced the home-take salaries of a larger segment of society. According to provisional figures compiled by the Federal Board of Revenue, the salaried persons paid Rs555 billion in income tax during the fiscal year 2024-25. The unwilling contributions were 51% or Rs188 billion more than the taxes collected from the salaried persons in the preceding fiscal year. In the fiscal year 2023-24, the government had collected Rs367 billion from the salaried persons. The government of Prime Minister Shehbaz Sharif had phenomenally increased the tax burden of the salaried class and claimed it would generate only Rs75 billion in additional income taxes. The highest ever contributions by the salaried persons in a single year showed how the voiceless people have been discriminated against the powerful sectors of the country. Last month, the government marginally reduced the tax burden of the people earning up to Rs3.2 million annually, which it said would give them a benefit of Rs56 billion. This nominal benefit of Rs56 billion compared to the current contributions is like a drop in the bucket, which would not address the fiscal woes of the salaried individuals. Despite putting enormous burden on the salaried class, the FBR missed its annual collection target by a margin of around Rs1.2 trillion. The details showed that non-corporate sector employees paid Rs236.5 billion income tax in the last fiscal year, which is higher by Rs67 billion or 40%. Corporate sector employees paid Rs165 billion in income tax, also higher by Rs54.6 billion or 49%. Employees of the provincial governments paid Rs99.5 billion in taxes, which was up by Rs49 billion or 98%. The federal government employees paid Rs54.2 billion, higher by Rs17 billion or 45%. Total income tax payments during the last fiscal year were Rs5.8 trillion and the salaried class paid Rs1 out of every Rs10 collected from the entire country under the head of income tax. In contrast to Rs555 billion paid by the salaried persons, the retailers, mostly unregistered, have contributed only Rs38 billion on account of withholding income tax on their purchases. The amount of tax that traders paid under section 236-H was 1,360% less than taxes paid by salaried persons. Besides, wholesalers and distributors also paid Rs25 billion withholding tax in the last fiscal year and almost half of them were unregistered with the FBR, said the sources. PM Sharif could not live up to his promise of collecting due taxes from the retailers. The Tajir Dost scheme failed to yield desired results and the government has not announced any new measure in the budget to bring the retailers in the tax net. Its biggest enforcement measure to ban the economic transactions by ineligible persons has become effectively useless after the government exempted more than 90% transactions from the purview of the new law. The government has allowed the ineligible persons, those having not enough declared resources, to buy up to Rs7 million worth of a car, Rs50 million worth plot and Rs100 million commercial property. In the budget, the government had imposed 2.5% withholding tax on traders, in the hope that this would force them to come into the tax system. Though the increase in the rate did help collect Rs21 billion more from the traders, the intended objective could not be achieved. The traders passed on the cost of the additional tax to the end consumers. In the last budget, the government had also substantially increased the tax burden of the real estate sector by increasing the rates for the non-filers and also introducing a new category of late filers in the budget. As a result, during the last fiscal year, the government collected Rs237 billion on sales and purchase of properties. This helped increase collection by 19% compared to the previous fiscal year but it was still below the mark. The combined taxes paid by both retailers and the real estate sector were 100% less than the total contributions by the salaried persons. On the sale of properties, the government collected Rs119 billion on account of withholding taxes, which were one-fourth more than the preceding fiscal year. On the purchases of the plots, the government collected another Rs118 billion, also higher by 14%. In the new budget, the government has abolished the federal excise duty on the real estate sector. The net taxes on the sales and purchases remained unchanged, although the government shifted higher burden towards the sellers by increasing their withholding tax rates.
Business Recorder
17 hours ago
- Business Recorder
Tax targets missed again
EDITORIAL: As had long been anticipated, the Federal Board of Revenue (FBR) missed its tax collection goal for FY2024-25, collecting Rs11.7 trillion in revenue against an original target of Rs12.9 trillion. The FBR's faltering performance during the year prompted two downward revisions of this target — first to Rs12.3 trillion, then to Rs11.9 trillion. In the end, the FBR missed the initial projection by over Rs1 trillion, and even the final, softened figure by Rs163 billion. These serial downward revisions and repeated misses signal more than just miscalculations by the tax bureaucracy and economic managers, although those are also troubling in their own right. More fundamentally, they expose a systemic failure to reform the chronic failings that lie at the heart of the country's tax architecture. The revenue targets were missed despite the imposition of exorbitant tax rates on salaried individuals and the corporate sector, the taxing of almost all essential consumable items, and the FBR upgrading its digital infrastructure, launching anti-smuggling operations and introducing additional tax measures worth a massive Rs1.3 trillion during the course of the year. In the end, its lacklustre performance also meant missing the IMF-set tax-to-GDP target of 10.6 percent. Even so, it's important to acknowledge that despite missing its collection goal, the FBR still generated revenue 26 percent higher than the previous year's, suggesting that part of the problem lay in setting an overly ambitious target. Annual tax objectives rely on making certain basic assumptions about key economic indicators, including the GDP growth rate, interest rates, inflation and anticipated policy outcomes, including those tied to the IMF programme. When these assumptions are misjudged, the resulting revenue expectations inevitably become skewed. In this case, too, FBR officials have cited overly optimistic projections of import volumes, inflationary pressures and high economic growth — all of which failed to materialise — as key reasons behind the shortfall. However, beyond the miscalculation of targets and economic indicators lie foundational shortcomings in the country's fiscal framework, most crucially, a chronically narrow tax base. The system continues to disproportionately burden the salaried class and the corporate sector — which together contributed a significant Rs5.8 trillion to the national coffers in FY2024-25 — as well as low- to middle-income groups. Meanwhile, large and often more profitable sectors — retail, agriculture and real estate, among others — remain either under-taxed or entirely outside the net. Genuine political will and the policy acumen required to address this imbalance meaningfully remain woefully lacking. The over-reliance on ever-rising tax rates and aggressive taxation measures by the FBR have meant that over time Pakistan has begun to mirror high-tax Scandinavian economies in terms of rates, but without offering the public comparable public services, social protections or institutional accountability that typically justifies such taxation burdens. The reforms needed to address the narrow tax base — such as bringing the vast retail and wholesale sectors into the net — remain largely unimplemented. Meaningful agricultural taxation, now being introduced not out of political will but under pressure from the IMF, is another case in point. There is only so much that can be extracted from the same segments of the population; beyond a certain threshold, higher tax rates simply incentivise evasion rather than improving compliance. When last year's collection target was set, the then FBR chairman, Amjad Zubair Tiwana, had cautioned that revenue was unlikely to exceed Rs11.8 trillion, the one forecast that proved accurate. This suggests that there is awareness at the top of the system's limitations, yet consequential reforms remain absent. Instead, the focus remains on introducing additional, often aggressive tax measures and expanding the FBR's coercive powers to squeeze more from the same outstretched sources. Until the political will, administrative capacity, effective policymaking and institutional accountability to broaden the tax base materialise, these cycles of overreach and underperformance will persist. Copyright Business Recorder, 2025
Express Tribune
2 days ago
- Express Tribune
Temporary mobile registration system launched for expats
Overseas Pakistanis can avail the FBR tax-free mobile registration facility for 120 days per each visit under the Federal Board of Revenue (FBR) policy. The Pakistan Telecomm-unication Authority (PTA) is facilitating this service through its free, automated Temporary Mobile Registration System, available via DIRBS portal: said a news release. This module has been introduced for those overseas Pakistanis and foreign nationals who do not intend to keep their mobile device in Pakistan and will be applicable for only one mobile handset device. To avail of this facility, the applicant shall provide his/her credentials including passport number, date of arrival and intended date of departure, mobile SIM issued in his/her name, and IMEI(s) of the device. The new system shall carry out real-time validation from FIA's Integrated Border Management System (IBMS) to verify the date of arrival of the applicant. On the lapse of 120 days of the stay of the applicant, the IMEI(s) utilised under this facilitation shall be suspended and will not be utilised on local network services. In case, the same applicant visits Pakistan again, he/she will be required to re-apply for this temporary facilitation, by re-entering the credentials which were used for the 1st or previous registration under this scheme. This system will not only facilitate overseas Pakistanis and foreign nationals coming to Pakistan on a short-term basis but will also create a positive image of the country. Likewise, the checks introduced under this system will ensure that only the genuine overseas Pakistani/foreign national avails the said facility.
