APTMA Protests Double Taxation on Exporters

The All Pakistan Textile Mills Association (APTMA) has voiced strong opposition to the ongoing double advance taxation imposed on exporters, denouncing it as a discriminatory practice that undermines the nation’s economic goals and export-oriented growth strategy.

In a formal communication to Minister of State for Finance Bilal Azhar Kayani—following a comprehensive joint session with Commerce Minister Jam Kamal and Special Assistant to the Prime Minister on Industries and Production Haroon Akhtar Khan—APTMA advocated for the prompt reversal of the prevailing tax framework.

Referring to the meeting on August 28, 2025, the Association highlighted the excessive tax burden on exporters under both the fixed and standard tax systems.

Currently, under the fixed regime, exporters are subject to a 1 percent tax on export revenues and a 0.25 percent export development surcharge, along with a 1.25 percent advance tax under the standard regime—which is adjustable against a 29 percent income tax and a maximum 10 percent super tax. Conversely, domestic enterprises are only required to pay the 1.25 percent advance tax.

APTMA cautioned, “This generates an adverse incentive system where domestic sales are favored over exports,” emphasizing that exporters encounter an effective advance tax rate of up to 135 percent of earnings. This significantly pressures their liquidity and reinvestment capabilities due to extensive and prolonged refund processes.

Despite numerous assurances, exporters continue to experience considerable financial difficulties due to delayed reimbursements across vital categories. These encompass outstanding refunds for sales tax, income tax, duty drawbacks, and various incentive programs—many of which have remained unresolved for over 200 days, leading to considerable interest expenses.

Of the total outstanding sum of Rs 329.5 billion, the sales tax component is Rs 55 billion, deferred sales tax amounts to Rs 105 billion, duty drawback totals Rs 25 billion, income tax reaches Rs 100 billion, DLTL/DDT accounts for Rs 35.5 billion, TUF stands at Rs 4.5 billion, mark-up subsidy is Rs 3.5 billion, and RCET differential (LIEDA) is Rs 1 billion.

Approximately 30-40 percent of eligible sales tax refunds are postponed for manual processing, with no advancement over the past 4-5 years. The World Bank approximates the impact of this delay to be around two percent of earnings. This situation also fosters mistrust in the government and diminishes confidence in new initiatives, given the substantial amount of unpaid dues to the sector.

Shahid Sattar, Secretary General of APTMA, stated, “We call for the immediate elimination of the fixed tax regime for exporters and propose that export earnings be taxed under the same standard income tax regime applicable to domestic sales. This modification, also specified in the National Industrial Policy 2025–30, must not be deferred until the next budget. The government possesses the legal authority to enact it immediately.”

He further noted that penalizing exports through double taxation while incentivizing domestic sales is illogical and without global precedent. “This structure diminishes competitiveness, discourages investment, and conveys an unfavorable message to an industry that should be spearheading Pakistan’s economic revival.”

Earlier, the Ministry of Commerce issued a public statement detailing the discussion between Commerce Minister Jam Kamal, SAPM Haroon Akhtar Khan, and APTMA representatives, including Aamir Fayyaz Sheikh, Kamran Arshad (Chairman APTMA), Rehman Naseem (CEO, Fazal Cloth), and Shahid Sattar.

During the session, Minister Jam Kamal reiterated the government’s dedication to export-oriented growth, underscoring that the forthcoming Textiles and Apparel Policy would prioritize reducing production costs, enhancing efficiency, promoting R&D, and expanding into new international markets.

He conveyed observations from a recent visit to Dhaka, where he noted Bangladesh’s noteworthy achievements in industrial progress and garment exports, highlighting the significance of benchmarking against regional competitors.

SAPM Haroon Akhtar Khan added that the upcoming National Industrial Policy would address the broader industrial environment, encompassing energy, tariffs, taxation, financing, economic zones, and investor support—including land lease models and streamlined processes for Greenfield projects.

He emphasized that under Prime Minister Shehbaz Sharif’s guidance, these reforms aim to provide renewed impetus to the nation’s industrial expansion.

The APTMA delegation urged the government to address structural inadequacies and cultivate a conducive environment to reinstate competitiveness in the global arena.

The meeting ended positively, with the Commerce Minister expressing confidence that consistent policy support and close engagement with stakeholders would significantly enhance Pakistan’s exports.