February 15, 2007	Thursday	Muharram 26, 1428

ISLAMABAD, Feb 14: Pakistan is considering tax breaks for its textile makers in an attempt to cut costs for the industry, a mainstay of the country's exports that is struggling with stiff competition.

Textile Industries Minister Mushtaq Cheema said tax relief was being discussed as part of a package of measures aimed at making the industry more competitive in the global market.

“The proposal is being discussed by a ministerial committee and after approval by the prime minister, it will be implemented immediately,” Cheema told Reuters late on Tuesday.

Cheema gave no details but industry officials said manufacturers were seeking a cut in utility costs as well as relief from various taxes that were eroding their ability to compete with rivals such as China, India and Bangladesh.

Textiles accounted for about 60 per cent of the country’s exports in 2005-06, and contribute 8.5 per cent to its gross domestic product (GDP). The industry employed 38 per cent of the total manufacturing work force.

But industry officials fear an erosion of its global market share unless the government takes steps to help offset production costs.

“Gas prices have gone up nearly 58 per cent from July and borrowing rates have doubled in two or three years, leading to an increase in the cost of production,” said Shafqat Ellahi, head of All Pakistan Textile Mills Association.

The government charges 0.5 per cent turnover tax and 1 to 1.5 per cent withholding tax on textile sales, besides a host of other levies, industry officials said.

“The impact of these taxes and levies comes up to about 3 per cent of sales,” Ellahi said.

The government also charges 5 per cent duty on the import of plant and machinery and 5 to 20 percent on spare parts.

Pakistan's textile exports rose 4.3pc to $5.3bn year-on-year in the first six months of the 2006-07 fiscal year, industry officials fear a decline in exports owing to their high prices.—Reuters