Pakistan’s formal packaged juice industry is urging the government to reconsider recent tax hikes, arguing they’ve hurt sales, revenue collection, and farmers.
The Problem:
- A 20% federal excise duty (FED) and 18% sales tax were imposed on the industry in the 2023-24 budget.
- Juice manufacturers claim this led to a 41% decline in sales, impacting their ability to utilize production capacity and invest in growth.
Impact on Farmers and Related Industries:
- Reduced fruit juice production means lower demand for surplus produce and export leftovers, affecting farmers’ income.
- The industry estimates fruit pulp purchases have dropped by nearly 50%, impacting pulp manufacturers dependent on them.
Concerns Regarding Tax Revenue:
- The industry argues that the initial surge in tax revenue due to higher taxes might not be sustainable.
- They believe a shrinking industry will lead to declining tax revenue in the long run.
Alternative Solutions Proposed:
- The juice industry proposes removing the 20% FED to enable growth and potentially generate more tax revenue over time.
- They suggest focusing on bringing the undocumented juice sector, estimated at 20% of the industry, into the tax net for increased revenue.
Export Potential:
- A healthy domestic juice industry is seen as crucial for developing the value chain and boosting exports.
- The industry forecasts potential exports of US$100 million within five years with a tax-friendly environment.
Looking Ahead:
- The FBR has assured the industry of efforts to avoid additional taxation burdens in the upcoming budget.
- Whether the government heeds the industry’s call for tax relief or seeks alternative solutions remains to be seen.
