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KARACHI: Fruit and vegetable exporters have rejected the new proposed tax regime for exporters and demanded restoration of the previous tax regime of 1 percent tax on the foreign proceeds.

In a letter to the Ministry of Commerce, Muhammad Shehzad Shaikh Chairman All Pakistan Fruit and Vegetable Exporters, Importers, and Merchants Association (PFVA) has termed the federal budget for the next fiscal year (FY25) a concerning budget for the exporters and said that federal budget 2024-25 is undoubtedly an “unfriendly budget” for the exporters of Fresh fruits & Vegetables and Horticulture sector.

According to PFVA, the federal government, in 1991, introduced the system of 1 percent Withholding Tax (WHT) on export proceeds aimed to facilitate the exporters in terms of “ease of doing the business” and on other hand it led to substantial revenue generation for the government.

Export of goods: Finance Bill proposes to change tax regime to ‘minimum tax’

Since the launch, this system of tax regime has been working quite satisfactorily for the exporters as well as for the government.

However, now it has been proposed in the budget 2024-25 to end this 1 percent tax regime and announced to impose a 29 percent tax that would be deducted on the profit earned by the exporters. This move would badly distract the attention of the exporters from exports to other domestic matters.

Waheed Ahmed former chairman PFVA said that with the new regime exporters will be required to maintain the book of accounts, money trail of profit and payment of profit; etc., to pay the tax to the federal government as per the new system.

He said that since the exporters purchase fresh fruits & vegetables from the farmers, which have privilege of zero-rated tax and neither registered with the FBR nor have any NTN. Even farmers do not provide any proper invoice to the exporters. While, as per the new tax regime exporters will be required to furnish proper purchasing documents, he added.

Thus the exporters would get heavily involved in the lengthy and tedious process of documentation and their focus of attention would be diverted from exploration of new international markets, marketing of Pakistani products, high quality packaging and quality assurance to maintaining accounts to pay the taxes, he mentioned.

Therefore, PFVA has strongly recommended that the government withdraw this proposed tax regime and resort to the previous system of 1 percent

WHT deduction on the foreign proceeds as was the system before.

Exporters have warned that if the previous tax system is not restored, the exports of fruit and vegetables will be hurt.

Copyright Business Recorder, 2024

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