KARACHI: Fruit and vegetable exporters have expressed strong opposition to the newly proposed tax regime for exporters, advocating for the reinstatement of the previous 1 percent tax on foreign proceeds. In a letter to the Ministry of Commerce, Muhammad Shehzad Shaikh, Chairman of the All Pakistan Fruit and Vegetable Exporters, Importers, and Merchants Association (PFVA), criticized the federal budget for FY25, calling it an “unfriendly budget” for exporters in the fresh fruits, vegetables, and horticulture sectors.
The PFVA highlighted that the 1 percent Withholding Tax (WHT) on export proceeds, introduced by the federal government in 1991, had successfully facilitated exporters by simplifying business operations while generating substantial revenue for the government. This system, deemed satisfactory by both exporters and the government, is now under threat.
The proposed budget for 2024-25 aims to replace this regime with a 29 percent tax on exporters’ profits, a change that Shaikh argues would divert exporters’ focus from export activities to domestic administrative tasks. Waheed Ahmed, former chairman of PFVA, explained that the new regime would require exporters to maintain detailed accounts, profit trails, and proper purchasing documentation. This requirement poses a significant challenge since farmers, from whom exporters purchase fresh produce, are zero-rated for tax, unregistered with the Federal Board of Revenue (FBR), and typically do not provide proper invoices.
Ahmed warned that this shift would involve exporters in a cumbersome documentation process, distracting them from exploring new international markets, marketing Pakistani products, and ensuring high-quality packaging and quality assurance. He stressed that this diversion could severely impact the export sector.
In response, the PFVA has strongly recommended that the government withdraw the proposed tax regime and revert to the previous system of a 1 percent WHT deduction on foreign proceeds. Exporters caution that failing to restore the previous tax system could significantly harm the country’s fruit and vegetable exports.
