Govt mulls scrapping export tax in budget

• 1pc advance tax removal may bring a meagre Rs100bn relief • Textile sector pushes for broader reforms, refunds, and lower energy costs • 68pc tax burden eroding competitiveness; industry demands restoration of Final Tax Regime ISLAMABAD: The government is considering abolishing the one per cent advance tax on exporters in the upcoming federal budget, a move that could provide relief of around Rs100 billion. However, no broader fiscal support for the struggling sector is currently on the table. Officials familiar with the budget discussions told Dawn on Friday that the proposal is under active consideration as part of limited, targeted measures for the export industry, particularly the textile sector, which has been pressing for wide-ranging reforms. The 1pc advance tax, charged on export proceeds, has long been criticised by exporters as a liquidity-draining measure that ties up working capital despite thin margins and delayed refunds. Industry data showed that exporters alone had paid nearly Rs200bn in excess on account of 1pc advance income tax during FY25 and FY26. “This is essentially returning a fraction of what has already been collected,” said a leading exporter, pointing to the cumulative burden of taxes, high energy costs, and blocked refunds that continue to constrain operations. The textile sector, which accounts for the bulk of Pakistan’s exports, submitted a comprehensive set of proposals ahead of the budget, including the restoration of the Final Tax Regime (FTR), a reduction in energy tariffs, clearance of over Rs327bn in pending refunds, and the revival of export incentives. However, sources indicated that most of these demands are unlikely to be accommodated in the upcoming budget, which remains constrained by revenue targets and ongoing stabilisation commitments. Industry data place Pakistan at a significant disadvantage in terms of effective taxation. Exporters face an estimated burden o...

Original source: Dawn Pakistan