APTMA urges reversal of double advance taxation structure

ISLAMABAD: The All Pakistan Textile Mills Association (APTMA) has strongly protested against the continued imposition of double advance taxation on exporters, calling it a discriminatory policy that undermines the country’s economic priorities and export-led growth strategy.

In a letter addressed to Minister of State for Finance Bilal Azhar Kayani—sent a day after a detailed joint meeting with Commerce Minister Jam Kamal and Special Assistant to the Prime Minister on Industries and Production Haroon Akhtar Khan—APTMA urged the immediate reversal of the current taxation structure.

Citing the meeting held on August 28, 2025, the Association criticized the double advance tax burden on exporters under both the fixed and normal tax regimes.

Currently, exporters are taxed 1 percent of export proceeds and a 0.25 percent export development surcharge under the fixed regime, in addition to a 1.25 percent advance tax under the normal regime—adjustable against a 29 percent income tax and up to 10 percent super tax. In contrast, domestic businesses are only subject to the 1.25 percent advance tax.

“This creates a perverse incentive structure where domestic sales are more attractive than exports,” APTMA warned, highlighting that exporters face an effective advance tax rate of up to 135 percent of profits, severely straining their liquidity and reinvestment capacity due to excessive and delayed refunds.

Despite repeated assurances, exporters continue to face significant financial distress from refund delays across key categories. These include pending refunds for sales tax, income tax, duty drawbacks, and various incentive schemes—many of which have remained unresolved for over 200 days, causing substantial interest costs

Of the total outstanding amount of Rs 329.5 billion, the stock of sales is Rs 55 billion, deferred sales tax, Rs 105 billion, duty drawback, Rs 25 billion, income tax, Rs 100 billion, DLTL/DDT Rs 35.5 billion, TUF Rs 4.5 billion, mark-up subsidy Rs 3.5 billion and RCET differential (LIEDA) Rs 1 billion.

Around 30-40 percent of due sales tax refunds are deferred for manual processing, on which there has been no progress in the last 4-5 years. The World Bank estimates the impact of this to be around two percent of profits. This also creates lack of trust in government and low confidence in new schemes given the huge quantum of unpaid dues to the industry.

“We urge the immediate abolition of the fixed tax regime for exporters and recommend that export proceeds be taxed under the same normal income tax regime applicable to domestic sales. This reform, also outlined in the National Industrial Policy 2025–30, must not be delayed until the next budget. The government has the legal authority to implement it now,” wrote Shahid Sattar, Secretary General of APTMA.

He added that penalizing exports through double taxation while incentivizing domestic sales is illogical and globally unprecedented. “This structure erodes competitiveness, deters investment, and sends the wrong signal to an industry that should be leading Pakistan’s economic recovery.”

Earlier, the Ministry of Commerce issued a press release detailing the meeting 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 meeting, Minister Jam Kamal reiterated the government’s commitment to export-led growth, emphasizing that the upcoming Textiles and Apparel Policy would focus on reducing manufacturing costs, enhancing productivity, promoting R&D, and expanding into new markets.

He shared insights from a recent visit to Dhaka, where he witnessed Bangladesh’s impressive success in industrial development and garment exports, highlighting the importance of benchmarking regional competitors.

SAPM Haroon Akhtar Khan added that the forthcoming National Industrial Policy would address the broader industrial landscape, covering energy, tariffs, taxation, financing, economic zones, and investor facilitation—including land lease models and one-window systems for Greenfield projects.

He emphasized that under Prime Minister Shehbaz Sharif’s vision, these reforms aim to inject fresh momentum into the country’s industrial growth.

The APTMA delegation urged the government to remove structural inefficiencies and provide an enabling environment to restore competitiveness in the global market.

The meeting concluded with optimism, as the Commerce Minister expressed confidence that sustainable policy support and close coordination with stakeholders would help boost Pakistan’s exports.