Presumptive Tax System for Exporters to Continue

ISLAMABAD (May 29 2006): While turning down a proposal to bring exports into general assessment scheme, the government has decided to continue with he presumptive tax regime for exporters during 2006-07, it is learnt.

Sources said that the decision to continue with the presumptive tax regime for exports was taken a meeting presided over by President Pervez Musharraf.

They said that the President did not agree with those officials who supported the proposal of bringing exports into general assessment regime for taxation. He directed the officials to facilitate the exporters to help them compete in the international market and capture maximum share by increasing exports.

Donor agencies had suggested to the government to do away with presumptive tax for exporters in the coming budget.

It is learnt that the Textile Ministry had strongly opposed any change in presumptive tax regime, saying that introduction of general assessment scheme would adversely affect the country's exports and would make them uncompetitive in the world markets.

In the presumptive tax system the exporters are required to pay tax at fixed ratio, without having any contact with the taxmen.

The proposed change was also contradictory to the government policy of minimising taxman and taxpayer contact.

Sources said that one reason for turning down the proposal was that it was felt that the outcome of bringing exports into general assessment regime would open another outlet for corruption.

The presumptive tax for exports varies from 0.75 percent to 1.50 percent of total value of exports, and taxmen are required to take it as final. Under presumptive tax regime, the taxmen can not question the value of the consignment or the tax amount paid by any particular exporter on any consignment. In this regime, the exporters feel easy to pay final tax liability on export proceeds through banks as it is a transparent process of payment of taxes.

It also saves time of both parties–the exporters and the taxmen. In the presumptive tax regime, exporters submit tax deduction certificate issued by the bank. Under presumptive tax regime, exports are exempted from 3 percent Workers Welfare Fund (WWF).

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