Karachi Chamber says shift to Normal Tax Regime has increased tax burden, compliance costs and operational challenges for exporters.
The Karachi Chamber of Commerce and Industry (KCCI) has urged the government to restore the Final Tax Regime (FTR) for exporters in the Federal Budget 2026-27, arguing that the existing taxation framework is undermining the competitiveness of Pakistan’s export sector.
In its budget proposals, the chamber expressed concerns over changes introduced through the Finance Act 2024, which shifted exporters from the Final Tax Regime to the Normal Tax Regime (NTR).
Under the previous FTR framework, exporters were subject to a final tax of one per cent on export proceeds. However, the revised regime replaced this mechanism with a two per cent levy on export receipts, comprising a one per cent minimum tax and an additional one per cent advance tax deducted electronically at source upon realization of export proceeds.
According to KCCI, exporters are also facing additional tax liabilities exceeding 45 per cent, significantly increasing the cost of doing business at a time when Pakistani exporters are already struggling with high energy and utility costs compared to regional competitors.
The chamber stated that the transition to the NTR has effectively doubled the tax burden on exporters while exposing them to increased regulatory scrutiny, including audits, advance tax notices, quarterly assessments and other compliance requirements.
KCCI maintained that compliant exporters are facing unnecessary administrative burdens and harassment, which has discouraged business expansion and contributed to a decline in the number of exporters operating in the country.
To address these concerns, the chamber has proposed the restoration of the Final Tax Regime as an optional tax framework for exporters and the reintroduction of the one per cent turnover tax on export proceeds.
The business body has also called for the timely settlement of sales tax refunds, the introduction of a transparent mechanism to provide tax relief to loss-making exporters, and the establishment of a dedicated committee to protect exporters operating under the NTR from unnecessary enforcement actions.
According to KCCI, reinstating the FTR would improve exporters’ cash flow and working capital availability, enabling businesses to expand operations, enhance competitiveness and secure additional export orders in international markets.
The chamber argued that a supportive tax environment would help reduce the cost of Pakistani products globally, encourage new entrants into the export sector, improve Pakistan’s ease of doing business ranking and stimulate industrial growth.
KCCI further noted that stronger export performance would contribute to employment generation, increased foreign exchange earnings and higher government revenues through broader economic activity.
