Pakistani rice traders have warned the government that their exports may decrease to $2 billion, down from an ambitious target of $5 billion. They blame the new tax regime, which is expected to make them pay a larger share of their earnings compared to the past.

In the last fiscal year, Pakistan’s rice exports to countries like Saudi Arabia, the United Arab Emirates, China, and Malaysia reached $3.9 billion, up from $2.1 billion the previous year, indicating an upward trend.

For the current fiscal year, Pakistani rice traders were aiming for $5 billion in exports. However, they believe this target may not be achieved due to the government’s decision to replace the Final Tax Regime with the Hybrid Tax Regime. The Hybrid Tax Regime will double the tax rates and require exporters to file returns monthly, which could negatively impact their earnings.

The Final Tax Regime refers to a system where specific sources of income, such as dividends, have final tax deductions made at the source, meaning no further tax is payable. In contrast, the Hybrid Tax Regime applies to businesses or individuals with multiple income streams, combining final taxed income with additional taxable income, requiring more detailed filing of returns and higher overall tax rates.

“This new tax regime will leave us uncompetitive in the international market. This will automatically result in a drop in our rice exports to $2 billion as we have already been doing business at record high markup rates and electricity costs,” Rice Exporters Association of Pakistan Chairman Chela Ram Kewlani to Arab News.

“There is a clear contradiction in the government’s statements and actions,” he said. “They want to boost the exports, but at the same time they want to burden the sector with heavy taxes.”

He said that that the new tax regime would allow the Federal Board of Revenue (FBR) to audit their businesses, leading to “corruption and harassment” of rice exporters.

The exporter stated that there is a clear contradiction between the government’s goal of boosting exports and its plans to impose heavy taxes on the sector.

The exporter also mentioned that the government plans to levy a 10% “super tax” on rice exporters with sales exceeding Rs 4 billion ($14.4 million).

The exporters had met with the Pakistan Finance Minister, Muhammad Aurangzeb who justified the new taxes by citing the country’s economic situation, though the meeting did not yield the desired results for the exporters.

The Chairman of the National Assembly’s Standing Committee on Commerce acknowledged the challenges posed by the additional taxes on rice exports. He informed that the committee will discuss these rice export issues in their next meeting on July 24, and stated that addressing export-related matters will be a priority, as the country needs to increase exports to generate more foreign exchange.

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