Lahore - The Pakistan Tanners Association central chairman Sheikh Saqib Masood has rejected the short sighted plan of Federal Board of Revenue to raise Sales Tax from the existing 2 per cent to the unprecedented level of 17 per cent on purchase of raw material by the all export oriented industries at a time when the country’s foreign reserves have already plummeted to lowest level due to falling export. 

Instead of facilitating the export oriented sector the government is planning to damage it by enhancing tax ratio despite the fact that the leather sector exports have declined during the last six fiscal years from $1.22 billion in FY 2007-08 to $1.01 billion in 2012-13.

The growth rate of leather sector exports is in minus and exports reduced to 14.09 per cent as against positive growth of the regional countries. Sheikh Saqib said that the FBR did not take stakeholders into confidence and instead of widening tax net they had adopted traditional way of squeezing those who already paid taxes. He said that any move to add taxes to export sector would be blunder and detrimental to the economy.  “FBR must realize that due to the energy crisis, impact of war on terror, law and order situation our cost of doing business is highest in the region. Pakistan was losing its ground and competitiveness against regional countries, China, India, Bangladesh, and Sri-Lanka,” he said.

The PTA Central Chairman said that export sector must be facilitated to earn foreign exchange for the country and it should not be used for revenue collection as was done all over the world. For FBR, it is easy to collect revenue from export sector in shape of Withholding Tax but it can be done without any increase in this head. FBR might introduce export friendly policies, he said, and urged that FBR must set export targets on higher side. With increased exports, the revenue authorities could raise revenue through previous rate of tax and country will get foreign exchange on one side and people will get employment on the other.

He, while expressing concern over the proposed increase in the general sales tax up to 17 percent, said it could lead to corruption and under-invoicing.  PTA Central Chairman said that higher percentage of tax always gave birth to malpractices such as under-invoicing and other corrupt practices. As a result, the government might lose both sales tax and customs duty on one hand while the general public would face inflationary pressure, as prices of all commodities would shoot up, he added. Sheikh Saqib said that any increase in tax of export sector would be extremely short sighted and damaging to our exports. He said that this second biggest export-oriented industry is already fighting for survival due to lack of basic facilities.

The PTA leader said that irrational increase of Sales Tax would stuck up huge working capital of leather sector in the sales tax regime as reimbursement process is already quite slow. As a result, the export capacity of tanners would certainly be curtailed to the alarming extent. The Chairman of PTA appealed Prime Minister Nawaz Sharif, Commerce Minister Khurram Dastgir and Chairman, FBR, Tariq Bajwa to take immediate notice of this ill-fated proposal and clear the situation in the supreme interest of leather exporters.