The federal government has proposed to tax the foreign income of exporters in the budget for the fiscal year 2023-24, well-informed sources told ProPakistani.
The government plans to tax exporters hoarding US dollars in order to manage the overall revenue impact in the new budget, plus another proposal to tax exporters not converting foreign currency within the specified time frame.
Sources said the authorities would prefer empowering the State Bank of Pakistan to collect additional levy from exporters with the likely aim to encourage documentation and transparency in the economy leading to more tax revenue from the services sector.
Under the federal budget for fiscal year 2023-24, the government’s focus is on achieving natural tax growth, along with implementing other measures such as putting an end to the fixed tax regime for the export sector, while at the same time promulgating the imposition of a Minimum Tax Regime (MTR) for exporters, sources added.
Through the MTR, exporters would be required to pay taxes on their taxable income instead of the current system where tax is paid on proceeds deducted by banks. This shift aims to promote documentation within the export sector.
Meanwhile, the government is considering another proposal that would essentially allow exporters to avail 100 percent tax credit in the new fiscal year, subject to conditions upon approval by competent authorities.
A wide range of tax recommendations are likely to be considered and incorporated into the Fiscal Year 2023-24 budget aimed at achieving the tax revenue target. In consideration of the proposals mentioned here, the focus is on targeting optimal avenues for enhancing the tax net.
Given the budgetary constraints faced by the government currently, implementation of the aforesaid measures at the export stage is an uphill task.