ISLAMABAD: Special Economic Zones (SEZs) investors have again urged the government to address anomalies in two crucial tax-related issues to stimulate investment in these designated zones.

In a letter to the Ministry of Finance, the Korangi Association of Trade and Industry (KATI) highlighted that the minimum turnover tax and the 25 per cent dividend tax were the points of contention.

Initially, under Section 113 of the Income Tax Ordinance, enterprises set up in SEZs enjoyed a decade-long exemption from all income taxes as per the SEZ Act 2016.

Pakistan has three SEZs: one in Faisalabad and two in Karachi.

A similar letter has been written to the prime minister by the investors of SEZs in Karachi.

It added that the subsequent removal of this exemption, sans consultation with current and potential SEZ investors, has ushered in an atmosphere of uncertainty.

The ambiguity surrounding the application of turnover tax on such enterprises has led the Federal Board of Revenue (FBR) to presume its imposition, resulting in the issuance of tax demands against these entities.

This regulatory maze significantly deters foreign and local investments, casting doubt on the government’s commitment to providing a conducive business environment in SEZs.

Projects within SEZs, characterised by significant capital investments and modest profit margins, are burdened by the spectre of turnover tax, which eclipses the benefits of other tax exemptions.

In response, recommendations have surfaced, advocating for the reinstatement of turnover tax exemption for SEZ enterprises, either through legislative amendments or the issuance of official circulars by the FBR.

Published in Dawn, April 14th, 2024

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

ICJ rebuke
Updated 26 May, 2024

ICJ rebuke

The reason for Israel’s criminal behaviour is that it is protected by its powerful Western friends.
Hot spells
26 May, 2024

Hot spells

WITH Pakistan already dealing with a heatwave that has affected 26 districts since May 21, word from the climate...
Defiant stance
26 May, 2024

Defiant stance

AT a time when the country is in talks with the IMF for a medium-term loan crucial to bolstering the fragile ...
More pledges
Updated 25 May, 2024

More pledges

There needs to be continuity in economic policies, while development must be focused on bringing prosperity to the masses.
Pemra overreach
25 May, 2024

Pemra overreach

IT seems, at best, a misguided measure and, at worst, an attempt to abuse regulatory power to silence the media. A...
Enduring threat
25 May, 2024

Enduring threat

THE death this week of journalist Nasrullah Gadani, who succumbed to injuries after being attacked by gunmen, is yet...