Pakistan’s leather industry is unsatisfied with the tax measures proposed in the Federal Budget 2024-25 for exporters, which they believe is detrimental. The Chairman of the Pakistan Tanners Association, Mr Muhammad Mehr Ali, has issued a statement having gone through the salient features of Federal Budget 2024-25, which was tabled in the National Assembly held on June 12 and observed the following for reconsideration of redressal: –

1. Those derived income from exports must pay a 1% tax on their export proceeds, a final tax. On the principle of horizontal equity, which states that taxpayers with equal income should pay equal tax, it is proposed that export income be subjected to normal rates, with one per cent tax collection on their export proceeds treated as a minimum tax.Complying would be detrimental to the Leather Industry of Pakistan. The existing 1% Income Tax adjustment against the total income of the exports is the best source of generating the fixed amount for the Government Kitty at the conclusion of the final adjustment, which the industry’s exporters regularly defray.
2. The proposal of a 1% Advance Tax under Section 154 of income tax is another tax invasion on the exporters, in addition to the 1% income tax liability already at the ground at the final tax adjustment to the exporters.Negative Repercussion(s):The cost of production in Pakistan for the leather industry is already exorbitant compared to neighbouring competitors, especially with basic utilities, as compared below. The exports of the Leather Sector of Pakistan is already in severe clutches of declining for the last three years consecutively, which was concluded for July-23 to April 2024 with the current plight of the industry is in negative (-) 19.60% for finished leather & overall section also stands in negative (-) 10.21% and accordingly further taxation on exporters will be last nail on the coffin of exports and apprehended inability to achieve the desired objective(s).

Apart from the above, a huge amount of refunds on account of Sales Tax, drawback, income tax, and deferred claims are pending with the Government, which is around Pak Rs.2.5 Billion payable to this vital industry, and our members are already facing severe financial stringencies for moving their export activities. Most of the Tanneries have closed down their operation because of the high cost of production AND the inability to COMPETE IN the INTERNATIONAL MARKET FOR LEATHER exploration to yield the desired goals.

The Chairman of PTA, Mr. Mehr Ali, has strongly articulated again to this specific One Point ONLY to keep retain 1% Income Tax final regime/adjustment of tax to the exporters without adding any further “Advance Tax Insertion” in the budget of income Tax to the exporters/PTA’s member exporters.

It is strongly appealed to the Honourable Prime Minister of Pakistan and Federal Finance Minister to revise the proposed insertion of Advance Income Tax to keep/retain the regular practice of 1% Final Income Tax Adjustment to the exporters, which has been in progress for the last several years, to save Pakistan’s exporters from further deterioration.