Pakistan Tea Association (PTA) has expressed its profound concerns and apprehensions vis-a-vis the proposed budget’s continuation of sales tax and income tax exemptions for the erstwhile FATA/PATA region.
Pakistan Tea Association elaborated that, while these exemptions may have been introduced with sincere intentions, but they have been misused for a long period.
Pakistan Tea Association apprised that the erstwhile FATA/PATA region, with a population of approximately 6.5 million, should logically import around 1 million kilograms of tea annually based on standard consumption metrics. However, the current import figures are a staggering 23 million kilograms. This discrepancy indicates a significant misuse of the tax exemptions; resulting in massive revenue losses for the government.
PTA has explained to the government that tea imported through legal channels is subject to a total tax rate of 53 percent; including 6.5 percent income tax. While, in contrast, tea imports into the erstwhile FATA/PATA are taxed at 15-19 percent only.
PTA maintains that this vast disparity in taxation results in a massive loss of sales tax and income tax revenue on the 22 million kilograms imported; which amounts to USD 70 million approximately. This data is based on the average pricing of tea at USD 3.12 per kilogram; that sums up a loss of Rs. 4.76 billion to the economy of Pakistan annually.
Pakistan Tea Association stresses that this phenomenon drains the Foreign Exchange Reserves (FER) of Pakistan. The disproportionate volume of tea imports into the erstwhile FATA / PATA region leads to a significant outflow of foreign exchange through illegal or informal channels.
PTA made it clear that this discriminatory taxation results in market distortion and illegal trade as the tax exemptions have created an environment ripe for smuggling and tax evasion.
Tea imported under these favorable conditions is often diverted to other parts of the country; undermining legitimate businesses.
PTA has informed that there are significant container value discrepancies as well; because container values are measured in kilograms or bags. This further highlights the exploitation of these exemptions.
PTA has appealed to the Prime Minister Shehbaz Sharif to reconsider the blanket tax exemptions currently offered to the erstwhile FATA / PATA region.
Pakistan Tea Association (PTA) demands policy reassessment pertaining to current fiscal policies concerning tea imports into the erstwhile FATA/PATA region as they are causing significant revenue losses, discouragement to tea manufacturers & packers, and decline in legitimate economic activities. Therefore, it is crucial to adopt a more equitable, fair, and transparent approach that supports regional development; while safeguarding the national economy.
PTA appeals for a reassessment in policy and proposes the same tax slabs for all kinds of tea imports; which is in the broader interest of the economy of Pakistan.
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