FPCCI condemns proposed tax changes and warns of collapse of export industry

KARACHI/ISLAMABAD – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has strongly opposed the federal budget proposal to replace the fixed income tax regime for exporters with a 29% profit tax. The move, deemed disastrous by industry leaders, sparked widespread outrage among Pakistan’s export sectors.

FPCCI Senior Vice President Saqib Fayyaz Magu, along with representatives of Faisalabad Chamber of Commerce, Sialkot Chamber of Commerce and various industry associations including textiles, pharmaceuticals, rice, fruits, vegetables, leather and tanners, expressed their concerns during the press conference. Magu warned that the proposed budget measures would escalate harassment and corruption by the Federal Board of Revenue (FBR), driving investors out of the country. He stressed that entrepreneurs should not be subjected to arrest without bail, describing the proposed law as draconian and calling for its immediate withdrawal. Failure to change the decision would trigger nationwide consultations with export industries to determine their response.

Rice Exporters Association presidents Chela Ram Kiwalani and Chaudhry Muhammad Israr Sharif criticized the timing of the proposal, noting its potential to severely damage exports in an already difficult economic period.

Abdul Rahim Janu emphasized that exporters are already burdened with taxes of 30-35% of their profits. Under the new national tax system, a 29 percent export tax combined with a 10 percent additional tax would add up to a staggering 39 percent, paving the way for increased harassment and corruption. John warned

that abolishing the flat tax system could lead to a $6 billion reduction in exports, a reference to the failure of a similar system 15 years ago due to rampant corruption and abuses.

The business community remains united in its opposition, warning of the dire consequences of implementing the proposed tax changes.

Meanwhile, the Pakistan Telecom Operators Association has expressed concern over the high taxes introduced in the 2024 budget.

In a letter written to the chairman of the Standing Committee on Finance, Salim Mandviwala, telecom operators expressed concern over the high taxes introduced in the budget.

The telecom sector has warned that foreign investments may withdraw from Pakistan if tax issues are not resolved. According to telecom operators, unresolved tax issues may result in legal complications for the government.

The letter emphasized that two major market participants have already decided to leave Pakistan. The letter said the telecommunications sector contributed PKR 340 billion in tax revenue last year and has attracted direct investments worth USD 15 billion so far.

According to the letter, the dream of a digital Pakistan will be seriously affected by the implementation of the budget proposals. The letter further mentioned that it is impractical to collect 75% advance tax from telecommunications users who do not submit returns.

The letter indicated that this decision would result in loss of revenue for both the telecommunications sector and the government. In addition, telecommunications companies have expressed concerns about the General Income Tax Regulation.

Regarding the issue of blocking SIM cards of people who do not report, penalties are being considered in the telecommunications sector. The letter shows that the telecommunications sector is not a party to the tax issue regarding entities that do not file returns.

As mentioned in the letter, increasing the sales tax rate on cell phones worth up to $500 will have a negative impact on the inclusion of low-income people.

The telecom operators have asked for a date to meet commission chairman Saleem Mandviwalla to raise their concerns.