KARACHI: The Pakistan International Freight Forwarders Association has opposed the imposition of excessive increase in the levy of minimum tax on services to eight percent.
The association’s general secretary, Habibullah A Latif, told Customs Today that currently withholding tax of 8 percent is deductable by withholding agents when making payments to services providing companies.
The freight forwarders and logistics service providers generally work on very low margins and depend on high volumes to earn profits. The analysis of published annual reports of some leading multinational freight forwarding and logistics companies suggests that they are earning very meager profits and in most of the companies it is below 5 percent of their revenue, he said.
“Assuming an average of 4 percent net profit margin for companies operating in this segment, the imposition of 8 percent minimum tax on the revenue will result in an effective income tax rate of 200 percent of the net profit i.e. even more than actual profit.
It means the companies will be required to pay this tax (which is more than their net profit) from their capital and as result their operations will become unsustainable and they will be forced to close down their businesses”, Habibullah added.
PIFFA leader said that the application of the minimum tax of 8 percent on the gross revenue was unjust, counterproductive and against the principle of free market economy and contrary to the practices of better marketplaces in the world. Rather it would have disastrous effect on the economic activity in the country rendering many business models unviable and causing contraction in the sector and unemployment.
The freight forwarders demanded the federal government to understand and take note of grievances of the freight forwarders who are regular and corporate taxpayers and avert this unjustified levy of minimum tax on the service providers on urgent basis, he concluded as saying.
