Exporters have Rejected a Proposed 29% Tax on their Export Earnings
They have warned of serious economic consequences if the fixed tax regime is abolished.
Saad khan 
Islamabad: Leaders of the All Pakistan Fruit and Vegetable Exporters Association (PFVA) have vehemently rejected the government's proposal to levy a 29% tax on export earnings in the 2024-2025 budget, which would replace the existing 1% withholding tax under the fixed tax regime.
Speaking to journalists at the Karachi Press Club on Tuesday evening, the exporters warned that abolishing the fixed tax regime in favor of the normal tax regime will have dire consequences for Pakistan’s economy. They emphasized that such a move would drastically reduce exports, lead to the closure of export units, cause widespread unemployment, prevent the government from meeting its tax revenue targets, and further depreciate the rupee due to a shortage of foreign exchange.
Waheed Ahmed, Patron-in-Chief of the PFVA, highlighted the severe impact on the agricultural sector, which is the backbone of Pakistan’s economy and provides employment to millions. He pointed out that the export of fruits and vegetables from Pakistan has reached $700 million, a figure the PFVA aims to increase to $1 billion and eventually to $3 billion within the next five years. However, the proposed 29% tax on export income threatens this goal, as exporters would be diverted from their primary objective of enhancing exports to focus on maintaining detailed records of income, expenditure, and profit.
Ahmed also noted the significant challenges posed by climate change, leading to food shortages not only for export but also to meet local demand. He stressed that the horticulture sector faces rising costs, making it increasingly difficult to compete in the international market. The PFVA had anticipated a significant relief package for the agriculture sector in the budget, considering these challenges.
The exporters urged the federal government to explain its allocation for Research and Development (R&D) and to spend ample funds to address the rising population and serious food security concerns in the country. They warned that the abolition of the fixed tax regime would not only reduce exports but also lead to economic instability.
The PFVA further explained that the implementation of the 29% tax would create numerous issues, including the challenge of tax exemption on the agricultural sector and the prevalence of cash-based transactions. With 90% of farmers being small-scale and benefiting from tax exemptions or zero-rate facilities, establishing a money trail for expenditure would be impossible.
Currently, under the fixed tax regime, exporters pay 0.25% as an Export Development Fund (EDF) in addition to a 1% withholding tax on export turnover and 0.25 to 0.35% bank charges, amounting to 1.85% of the total turnover. The new tax proposal would significantly disrupt this system.
In conclusion, the exporters stressed that the proposed 29% tax on exports would lead to a decline in export levels, making it difficult for them to fulfill export orders due to the ensuing uncertainty. They called on the government to reconsider the tax proposal to avoid severe economic repercussions.
