Mian Zahid Hussain, Chairman of the Pakistan Businessmen and Intellectuals Forum, has said that the 1% final tax regime for exporters should be reinstated as the country’s economy is moving towards a weak but clear recovery, evidenced by improved performance of major industries and heavy remittances from overseas Pakistanis.

Addressing the business community on Monday, Mian Zahid Hussain said that although the economy is on the path of a “weak but clear recovery,” this hard-earned stability is at risk.

Evidence of the economic recovery includes the revival of large-scale manufacturing (LSM) after a long stagnation. In December, the HBL Pakistan Manufacturing PMI reportedly reached a ten-month high of 52.8, along with the first increase in new export orders in six months. Hussain emphasized that this demonstrates the resilience of Pakistani industrialists, who are striving to compete globally despite facing the highest energy costs in the region.

This emerging industrial activity is being bolstered by substantial remittances sent by overseas Pakistanis. According to Hussain, remittances reached $3.6 billion in December, bringing the total for the first half of the current fiscal year to over $19.73 billion. He said these funds have played a crucial role in stabilizing the rupee’s value near 280 and supporting foreign exchange reserves, giving the government significant financial leeway for policymaking.

However, Hussain warned that this progress could be jeopardized if the cash flow issues facing the export sector are not addressed promptly. He demanded that the government approve the proposal to reinstate a one percent fixed final tax system for exporters.

He attributed the liquidity crisis to a complex taxation system and the abolition of zero-rating on local supplies under the Export Finance Scheme (EFS). He explained that this has resulted in billions of rupees being stuck in refund claims, effectively freezing the working capital of small, medium, and large export businesses.

He argued that the implementation of a one percent fixed tax would not only simplify tax compliance and reduce harassment from tax authorities but also significantly boost the confidence of exporters to secure future international orders.

Despite the positive overall LSM figures, Hussain added that the textile industry, described as the “cornerstone of exports,” is suffering from a “volume crisis” due to a shortage of local cotton and high input costs.

He stressed that the demand for a one percent fixed tax should not be seen as a concession but as an “investment in export continuity.” With remittances supporting the currency and the industry showing signs of recovery, he described the current moment as a “golden opportunity” for the government to implement this crucial reform for the export economy.