KARACHI: At a time when the Federal Board of Revenue (FBR) has started releasing billions of refunds to exporters, the tax collecting authority has denied that it is deviating from its commitments that it had made with the textile exporters on the zero-rated tax regime.
“We are acting on everything we committed to the representatives of the textile associations,” FBR Spokesperson Dr Muhammad Iqbal told The Banker Pakistan.
“But if they demand anything other than what we committed, we cannot provide it because of our limitations.”
All Pakistan Textile Mills Association (APTMA) has been constantly blaming the FBR, saying it lacks commitment in implementing the agreement it signed with the textile industry regarding the resumption of zero-rated tax regime.
“There is a serious lack of will on part of the government in implementing the zero-rated tax regime,” commented APTMA Vice Chairman Atif Inam.
Finance Minister Ishaq Dar, during his budget speech on June 3, announced that the zero-rated tax regime would be implemented for five major export-oriented sectors including textile, carpet, leather, sports goods and surgical industries from the next fiscal year starting from July 1, 2016.
The news was welcomed by the textile mills and other sectors that had been lobbying for the measure for years.
Up until a few years ago, these sectors were exempted from numerous taxes by a zero-rated tax regime, however, the regime was called into question in a plea that argued that exporters had been selling their (tax protected) goods in the domestic market as well.
The FBR says the regime has been properly implemented with effect from July 1, 2016. However, ATPMA has accused the government of not implementing it in letter and spirit.
“The problem of refunds is still there. If exporters were losing Rs5 million in refunds before the implementation of zero-rated tax regime, they are now losing Rs2 million,” said Inam.
Two weeks ago, APTMA published advertisements in leading newspapers asking the government to stop ‘some elements’ who were trying to sabotage the agreement made between Dar and 18 textile associations.
The advertisement also mentioned that the government is threatening to collect ‘Further Tax’ on which the two parties agreed that it would be zero rated.
APTMA also said that the government agreed to apply the zero-rated tax regime on major capital investment, machinery and essential spare parts being imported by the five export oriented sectors.
When asked, the FBR spokesperson said that the tax authorities collect ‘Further Tax’ from those industries that do business with unregistered industries so that they pay some form of taxes.
“There are few areas where the FBR cannot stop collecting taxes. For instance, there are some imported raw materials that have considerably high local consumption, but they are also used by exporters. In such cases, the FBR has to collect taxes on all imports and then reimburse the funds to the exporters,” he added.
“Despite all these systemic shortcomings, we are ready to sit with the textile industry to sort out issues related to the zero-rated tax regime,” he said