Karachi, April 27, 2025 – The Karachi Chamber of Commerce and Industry (KCCI) has urged the government to introduce tax relief measures for yarn traders in the upcoming federal budget 2025-26, aiming to boost compliance and support growth within the sector.
In its official tax proposals, the KCCI emphasized the challenges currently faced by the yarn trading community, particularly due to the 0.5% withholding tax imposed by the Federal Board of Revenue (FBR). According to KCCI, this tax rate is discouraging yarn traders from registering with the tax authorities, creating compliance hurdles and causing significant revenue losses for the government.
The KCCI outlined key concerns linked to the yarn trading sector:
A) Business Registration Hesitancy:
Yarn traders often refrain from registering with the FBR due to business uncertainties and the high withholding tax rate. The KCCI pointed out that reducing this tax burden would encourage greater registration, thereby expanding the tax base.
B) Turnover-Based Profit Structure:
The KCCI reiterated that the profits earned by yarn traders are largely turnover-based, a fact acknowledged during recent consultations with the concerned authorities. Tax policies must reflect this business model to ensure fairness and stimulate voluntary compliance.
To address these issues, the KCCI proposed a reduction of 0.25% in the withholding tax rate for yarn traders. This recommendation, according to the chamber, is in line with previous discussions held with fiscal policymakers.
The KCCI further argued that the suggested tax cut would have multiple positive impacts:
A) Enhanced Compliance:
Lowering the withholding tax would likely result in more yarn traders registering with the FBR, ultimately boosting national revenue collection.
B) Equitable Taxation:
Recognizing the unique turnover-based profit model of yarn businesses would ensure that tax measures are fair and accurately aligned with the sector’s operational realities.
C) Sectoral Growth:
By reducing the tax burden, the yarn industry could enjoy more stable and sustainable growth, thereby strengthening Pakistan’s overall industrial base.
D) Revenue Optimization:
Promoting compliance through fair taxation could help recover revenue losses, providing a significant boost to the national economy.
The KCCI concluded that adopting these proposals would not only benefit yarn traders but also contribute positively to Pakistan’s broader economic development.