Prime Minister Nawaz Sharif announced a zero-rated tax regime for the export sector to help it overcome liquidity crunch, and eliminate corruption in payment of refund claims. Such a bold move, one that will greatly benefit the export economy can accomplish wonders. Business interest have always been given a good deal by the government, often ignoring agriculture and the welfare for the general population.

The premier took the decision during a meeting with leading businessmen, to discuss the issue of pending tax refunds to exporters. He was also informed about the past arrears of the refund, where options were discussed for the clearance of pending ones. Many concerns were also raised by them, one being the practicality of it. A few years ago, the Federal Board of Revenue (FBR) introduced the zero-rated regime for five export sectors, namely textile, sports, leather, carpet and surgical sectors. However, the scheme was reversed on a plea that exporters were also selling products in the domestic market which needed to be taxed. The participants also briefed him about existing business environment and proposed measures to achieve rapid economic growth, including encouraging youth by establishing start-ups. Moreover, the PM constituted a committee to evaluate the proposals and come up with recommendations within the next 10 days to reach a final decision.

It is estimated that the total impact of zero-rating on the export sector would be around Rs 6bn to Rs 10bn, also considering cases where some exporters, especially the textile sector, sell their products in the domestic market, which are originally meant for exports. One should however, also remain wary of the fact that many of the states’ promises have remained unfulfilled regarding the support of export oriented sectors. The zero-rated sales tax regime for exporters would certainly bring down the industrial cost of doing business and Pakistani products would be able to win their due share in the international market. However, a zero-rated tax regime for the export sector can only be fully appreciated if it is emancipated from the quagmire of the energy shortfall.