THE export policy of the government in many ways appears to be working nega-tively, having a detrimental impact on the economy. In the 2024-25 budget, the Fixed Tax Regime (FTR), under which exports were liable to pay one per cent tax on turnover, was withdrawn and replaced with a new mechanism.

The FTR scheme had been in vogue for decades. It provided the government with a very transparent way to tax the export proceeds. Revising the FTR rate would have made more sense than subjecting the exporters to harassment and opening another window for corruption.

Pakistan’s exports are more than just a significant component of the economy; they are a vital lifeline for balancing the external account. The country’s financial stability demands a meaningful increase in exports.

Instead of facilitating and reducing the cost of exports, the new step will have a negative impact on our exports, as the local goods will become less competitive in the international market.

Under the new plan, the tax burden will be more than three times compared to Bangladesh and more than twice that of Vietnam. Due to deduction on export proceeds, obtaining refunds will be difficult for the exporters who will be at the mercy of bureaucratic delays as well as potential harassment and extortion.

Under the FTR, the exporters were more focussed on enhancing the country’s exports instead of worrying about the Federal Board of Revenue (FBR) officials, massive paperwork for audit, or main-

taining record of business transactions to reply to FBR notices. It is very difficult for the exporters, especially for the small and medium enterprises (SMEs), to manufacture goods after the abolition of the FTR scheme because the SMEs do not have sufficient financial resources and trained workforce to maintain their office records to fulfil FBR requirements.

It is beyond comprehension why the government decided to end the FTR scheme and, instead, created hurdles for the exporters who are already facing a lot of problems, such as expensive utilities, high interest rate, worsening law and order situation, and massive amounts stuck up in the sales tax refund process.

I suggest that the government should continue with the FTR regime for at least five export-oriented sectors. It will play a significant role in increasing exports, generating more employment, and earning valuable foreign exchange for the national exchequer.

As such, in the present scenario, the government’s top agenda should be to increase exports, and take immediate positive measures to remove all bottlenecks in its growth. If the managers of national economy are keen to put exports back on the growth track, they should facilitate the exporters just as other countries do.

Yahqub Lodhi
Karachi

Published in Dawn, September 9th, 2024