KARACHI: Renewed efforts to iron out differences between exporters and the Federal Board of Revenue (FBR) over the sales tax regime for export-oriented industries failed when both the sides met on Tuesday at the PHMA House.

The  FBR member Inland Revenue Raza Baqir on Tuesday dashed from Islamabad to Karachi to pacify agitating exporters over the issue of SRO 154.

The said SRO withdraws policy of zero-rated status to five export-oriented industries.

The leaders of the affected sectors that include value-added textile sector, leather goods, carpets, surgical and sports goods told the member Inland Revenue that they would not accept the FBR position as they argued it would promote corruption and aggravate the liquidity problem for export trade.

In the past, the FBR thrice introduced refund system by withdrawing zero-rated status of export-oriented industry but failed because it ended up in resource drain more than revenue collection, these leaders argued.

They believed that safeguards to exporters against delays in payment of refunds by fixing penalty equal to bank mark-up rate would not ensure timely settlement because of rampant corruption.

These leaders complained that even today outstanding refunds of billions of rupees are pending before different revenue collecting agencies at federal and provincial level, including FBR, Sindh Revenue Board and Punjab Revenue Authority.

They reminded the member Inland Revenue Raza Baqir that only 10 days back FBR chairman Ali Arshad Hakeem in a meeting with the leaders of the pvrivate sector agreed to impose one per cent sales tax on these sectors, but it has been fixed at two per cent.

“The trust deficit between business community and the FBR is huge and we cannot take any risk at such difficult times when utility tariffs are being enhanced frequently, law and order situation is critical and profit margins have fallen,” a leader said.

They further said that there was a tough competition in the world market where exporters are trying to survive without making much profit.

Responding to the apprehensions raised by business leaders, the FBR member Inland Revenue said that FBR wants to resolve issues amicably and reminded that all over the world only exports are zero rated.

However, business dealers said that FBR’s definition for zero rating from sales tax is different from what they know, therefore, if it means that first we have to pay and then get refund, the business community totally rejects it and would never accept this definition.

They suggested that their status of zero rating be maintained and the FBR should strive hard to ensure growth in the industry so that more revenue could be generated.

The member Inland Revenue asked the leaders of five sectors to sit together and try to frame suggestions on the issue which would be taken up in next meeting with the team of FBR.