In the upcoming budget (2023-24), the government is considering move exporters from the Final Tax Regime (FTR) to the Minimum Tax Regime (MTR) scheme as a means to promote documentation.
To address the documentation of the economy, the Reforms and Resource Commission (RRMC) has put forward recommendations. Given that Pakistan heavily relies on exports, the government has been implementing various measures to encourage and incentivize exports, including the FTR regime for exporters. The RRMC suggests that in order to promote documentation, the FTR scheme for exporters should be transitioned to the Minimum Tax Regime (MTR) scheme in the initial phase.
The RRMC recommendation states, “The FTR of exporters should also be converted into MTR. The tax credit regime may be reduced to lower the tax incidence; however, it is necessary to abolish the FTR to improve documentation.”
In the subsequent phase, exporters should be granted the opportunity to avail 100% tax credit, subject to specific conditions similar to those provided for Non-Profit Organizations (NPOs) under the law. To benefit from this provision, exporters would need to maintain proper documentation and adhere to relevant government regulations.
The proposed MTR scheme has the potential to enhance documentation in the export sector and motivate exporters to maintain accurate financial records. This, in turn, can contribute to a more transparent and inclusive economy. Additionally, the scheme can aid the government in increasing tax revenue, which can be allocated towards public services and development projects that are in need of funding.
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