Muhammad Mehr Ali, Chairman of the Pakistan Tanners Association (PTA), has requested the Prime Minister and the Federal Finance Minister to reconsider the proposed introduction of advance income tax. He advocates maintaining the existing practice where exporters currently pay a 1% final income tax adjustment on their export proceeds, a system that has been in place for several years. Ali argues that this adjustment is crucial to prevent further deterioration of Pakistan’s export sector.

Currently, exporters earning income from exports pay a final tax of 1% on their export proceeds. Based on the principle of horizontal equity, which calls for equal taxation of taxpayers with equal income, there is a proposal to subject export income to normal tax rates, treating the 1% tax collection on export proceeds as a minimum tax.

Ali emphasizes that imposing additional taxes on exporters could severely harm Pakistan’s leather industry, which already faces high production costs compared to neighboring competitors. He points out that Pakistan’s leather sector has experienced consecutive declines over the past three years, with a significant negative impact on finished leather (-19.60%) and overall exports (-10.21%) from July 2023 to April 2024. Implementing further taxation on exporters, according to Ali, would exacerbate these challenges and hinder the industry’s ability to achieve its objectives.