KARACHI: Foreign shipping lines handling 90 percent of Pakistan’s seaborne trade have warned of a “total disruption” of the country’s imports and exports, citing “ill-planned” tax requirements that their agents say Pakistan’s Federal Board of Revenue (FBR) is trying to enforce.
In a letter written to Prime Minister Shehbaz Sharif dated Sept. 19, the Pakistan Ship’s Agents Association (PSAA) said FBR officials were compelling non-resident ship owners to register themselves on the national tax collector’s portal, obtain national tax number (NTN), file tax returns and take exposure to the country’s “unpredictable” tax environment.
Calling the move as “ill-planned”, the PSAA warned of an “impending crisis” that is likely to affect Pakistan’s entire seaborne trade.
“By arbitrary one-sided actions, FBR is creating extreme hardships for foreign flag vessels upon which Pakistan’s trade is entirely dependent,” PSAA chairman Mohammed A. Rajpar said in the letter addressed to the prime minister.
“You are requested to direct the concerned authorities to restore the previous system… rather than resorting to strong arm tactics which tantamount to threatening total disruption to Pakistan’s imports and exports.”
PSAA represents foreign shipping lines such as Maersk, China Ocean Shipping Company (COSCO), Mediterranean Shipping Company (MSC), CMA CGM and around 50 others.
The South Asian country depends on these shipping lines for the transportation of 90 percent of its seaborne trade, which amounted to $90.4 billion in the last fiscal year that ended in June, according to the Pakistan Bureau of Statistics (PBS). The remaining 10 percent cargoes, mostly comprising oil, are shipped by the state-run Pakistan National Shipping Corporation (PNSC).
Rajpar said all non-resident foreign shipping firms had their authorized representatives present in Pakistan and had been fulfilling and complying with all legal requirements as far as income tax was concerned.
“This move by FBR runs totally counter to the current government’s ease of doing business policies, particularly when dealing with foreign entities,” the PSAA chairman said.
REVENUE AUTHORITY REJECTS CLAIMS
The warning comes as Sharif’s government has joined hands with the International Monetary Fund (IMF) and bilateral partners like Saudi Arabia, China and the United Arab Emirates (UAE) to revive Pakistan’s debt-ridden economy by increasing revenues.
The IMF’s $7 billion loan program, which Islamabad secured last year, requires the government to broaden the country’s narrow tax base and plug revenue leakages.
“The claim that FBR has introduced an unlawful requirement is misplaced,” Wasiq Mushtaq, a deputy commissioner at the FBR’s inland revenue service, told Arab News, citing relevant income tax law which “expressly requires every ship’s master to file voyage-wise freight returns in Pakistan.”
“The system is lawful, internationally consistent, and facilitates trade as process of ship’s assessment would be transparent and digitally handled thus more expedient rather than hindering it.”
He said registering non-resident ship owners was a statutory requirement and was being practiced globally, citing examples of India, Malaysia and Australia.
The non-enforcement of relevant law had resulted in the outflow of “illegal remittances” from the country, according to the FBR official. He did not specify a number for the said remittances.
It has “prima-facie resulted in huge revenue losses,” Mushtaq added.
POSSIBLE CONSEQUENCES
Syed Tahir Hussain, the PSAA secretary general, insisted that the tax requirements were causing difficulties for all foreign shipping lines, which might stop transporting shipments if the authorities did not address the issue.
“The shipping lines would either stop calling at Pakistani ports, while those already anchored at local ports would not be able to sail out for the want of clearance from income tax authorities,” Hussain warned.
