The All Pakistan Textile Mills Association (APTMA) has called for an “export-centric” programme, stressing that high taxes and persistent delays in refunds have squeezed liquidity from manufacturing sectors.
In a letter dated April 17, 2024, and addressed to Finance Minister Muhammad Aurangzeb, APTMA Chairman Asif Inam stated: “As the country heads towards negotiating another IMF programme, fundamental reform required is to foster an export-centric culture across all sectors of the economy.
“The design of this new programme should accommodate the peculiar circumstances where our essential need is to develop and expand exports. This will go a long way in alleviating one of Pakistan’s most pressing issues that is a chronic shortage of foreign exchange,” read the letter.
APTMA urges govt to end unproductive cross-subsidies
APTMA lamented that exports in the country cannot thrive under prohibitive anti-export policies that have been implemented over the past year.
“High taxes and persistent delays in refunds have squeezed out all liquidity from manufacturing sectors that represent 20% percent of GDP but are responsible for over 60% of tax revenue with as much as 20 different federal and provincial taxes imposed on manufacturing firms.
“Adding fuel to the fire, power tariffs for industrial consumers have skyrocketed to over 17.5 cents/kWh – over twice the regional average – while gas prices have also increased by 223% since January 2023, leaving no financially viable source of energy for manufacturing activities in Pakistan,” said APTMA.
The association said that the prohibitive cost of energy has rendered manufacturing activities financially unviable, forcing a drastic reduction in industrial energy consumption.
“As we prepare to enter another IMF programme, the terms of which will most certainly define the economy’s trajectory for the next three to five years, the focus should be placed on bringing informal sectors into the formal economy and stimulating industrial activity to dilute public debt servicing costs through economic rather than taxing all productive activities to extinction—whether through explicit taxes like income and sales tax, or hidden ones like cross subsidies embedded in power tariffs.
In the domain of taxation, APTMA called for a rationalization of corporate tax rates to regionally comparable levels. “Moreover, to promote exports, firms should be offered tax credits or rebates in proportion to the share of their production that is exported,” it said.
APTMA calls for urgent removal of power tariff cross-subsidy
APTMA believed that reducing the tax burden on exporting firms would have an immediate and salutary impact on traditional and non-traditional exports.
“Moreover, the tax disparity between unlisted and listed firms should be widened to favour the former.”
Similarly, in the energy domain, power tariffs for industrial consumers must be reduced to a regionally competitive level of 9 cents/kWh by removing cross subsidies worth over Rs220 billion per annum to nonproductive sectors of the economy, APTMA urged the finance minister.
“According to our estimates, power tariffs of 9 cents/kWh could increase power consumption in just the textile sector by up to 1,530 MW/annum to bring in an additional $1.06 billion in power sector revenue, around $9 billion/annum in additional exports, and an addition of over $513 million to government revenue through various channels.
“Additionally, these lower power tariffs will also prompt an automatic shift from captive gas-based generation that currently costs around Rs. 33/kWh (11.8 cents/kWh) to grid electricity, freeing up domestic gas-based resources as well as reducing the LNG import bill,” it said.
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