Pakistan mulls tax breaks for exports to boost trade

As part of a plan to increase foreign exchange earnings and end a chronic boom-and-bust cycle, Islamabad may offer tax breaks to various industries with export potential.

That’s according to Pakistan Prime Minister’s adviser for commerce and investment Abdul Razak Dawood, who told Bloomberg that an export policy will be announced next month.

“I am in favor of limited time-bound incentives,” Dawood said in an interview, indicating a three- to four-year period for tax breaks.

This comes despite Pakistan's reported promise to the international Monetary Fund (IMF) not to grant any further tax amnesty schemes as a condition of its bailout program. According to the Letter of Intent (LoI) submitted to IMF, Pakistan has stated that “we have refrained from granting further tax amnesties."

Engineering, chemicals, technology and footwear are among the 20 sectors identified for incentives. Pakistan’s trade deficit narrowed 33 percent to $9.7 billion in the five months to November, as imports plunged by 18 percent and exports rose 5 percent in the same period.

Dawood said he sees outbound shipments growing to $24.5-$25 billion this fiscal year ending in June, up from $23 billion last year. The expected new free-trade agreement with China could help to grow overseas shipments by at least $500 million annually.

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