Page 8 - TEXtalks International July/August 2022

09

Pakistan’s budget and

super tax jolt the

textile sector

Pakistan’s newly elected government presented a The Value-Added Textile exports have surpassed
9.52 trillion Pakistani rupee ($47 billion) budget for and achieved milestones with historic enhancement
the fiscal year 2022-23. The budget aims at tight in export and foreign exchange earnings during
fiscal consolidation and to achieve 5% economic recent years. Imposition of super-tax will push the
growth, which is lower than the 5.97% growth in the exports towards doldrums and shall completely
outgoing year. Reportedly, the IMF is demanding a shatter the strenuous efforts of exports and will
further boost in tax rates and wants the country to sabotage value-added textile export. The
collect more direct taxes and remove remaining fuel export-oriented is delivered beyond excellence, and
subsidies. As per the proposed budget, the total national exports recorded to the tune of approx
government aims to collect Rs 7 trillion ($34.6 USD 28.87 Billion (11 months of FY2021-22) in
billion) in taxes through the Federal Board of which total textile export is worth $17.62 billion with
Revenue (FBR). Pakistan has increased the tax rate an increase of 28% whereby Karachi has, as usual,
on banking companies from 39% to 42%, which will taken the lead to achieve the milestone in exports
likely bring Rs 15-20 billion ($74.2-$98 million) in with its more than 50% share.
additional revenue. The tax on immovable property
assessed above Rs 25 million ($0.127 million) will The industry is paying the highest taxes as
also be taxable now. compared to other sectors. Other sectors,
compared to industry, are under-taxed or pay very
Adding to the miseries, the government announced nominal taxes. At the same time, a substantial
that the coalition government planned to impose a parallel economy is paying zero taxes and left
10% super tax on large-scale industries and unbridled and scot-free by the government, which
defended the ‘tough decisions’ which he said were shows forgetfulness on the part of all successive
being taken to protect the economy. The industries governments. Therefore, the Value-Added Textile
facing the super tax include cement, steel, sugar, oil Export Industry demand to immediately withdraw
and gas, fertilizers, LNG terminals, textile, banking, the super-tax imposed on the export industry in the
automobile, cigarettes, beverages, chemicals, and
airlines. The textile sector is the backbone of interest of the national economy and exports;
Pakistan’s economy, and the sector is looking otherwise, the sitting government shall be entirely
forward to having good government support to help responsible for the expected destructive impact on
the country in its economic crisis further. However, the export sector, which may lead to complete
the government’s current priorities are not pleasing; closures and lay-offs heading towards massive
thus, the sector has rejected the super tax. unemployment and law and order situation.

July/August 2022 July/August 2022