Key Takeaways:
– Rice export target reduced from $5 billion to $2 billion.
– New tax regime expected to increase exporters’ costs significantly.
– Potential impact on competitiveness in the international market.
Export Concerns
Pakistani rice traders have alerted the government that their export earnings could fall to $2 billion, significantly below their initial target of $5 billion. They attribute this anticipated decline to the introduction of a new tax policy that would increase their financial burdens.
Previous Export Success
In the last fiscal year, Pakistan saw its rice exports to major markets such as Saudi Arabia, the UAE, China, and Malaysia soar to $3.9 billion, a substantial rise from $2.1 billion the previous year. This upward trend had initially encouraged traders to set a $5 billion export target for the current fiscal year.
New Tax Regime Issues
However, the shift from the Final Tax Regime to the Hybrid Tax Regime has raised concerns among exporters. The new regime will double the tax rates and necessitate monthly return filings, which could severely impact their profitability. The Final Tax Regime allowed for specific income sources to be taxed at the source, eliminating the need for further taxation. In contrast, the Hybrid Tax Regime requires comprehensive reporting and higher taxes for businesses with multiple income streams.
Industry Reactions
Chela Ram Kewlani, Chairman of the Rice Exporters Association of Pakistan, expressed his concerns to Arab News, stating, “This new tax regime will leave us uncompetitive in the international market. This will automatically result in a drop in our rice exports to $2 billion as we have already been doing business at record high markup rates and electricity costs.”
Kewlani criticized the government’s contradictory stance on promoting exports while imposing heavy taxes, suggesting that the new regime would open doors to “corruption and harassment” by the Federal Board of Revenue (FBR).
Government Response
The government plans to introduce a 10% “super tax” on rice exporters with sales exceeding Rs 4 billion ($14.4 million). Despite meeting with Pakistan’s Finance Minister Muhammad Aurangzeb, exporters did not achieve a favorable outcome, although the Minister justified the new taxes due to the country’s economic challenges.
Legislative Actions
The Chairman of the National Assembly’s Standing Committee on Commerce acknowledged the adverse impact of the additional taxes on rice exports. He confirmed that the committee would address these issues in their next meeting on July 24, prioritizing the need to boost exports to generate more foreign exchange.
