Taxation reform demanded by tea importers within budget plan suggestions
A Rant About Tea Taxes: Pakistan Tea Importers' Battle for Fair Trade
Tea importers in Pakistan are fed up with the government's import taxation policies, calling for significant reforms to tackle alleged loopholes causing havoc in the formal trade scene and costing the nation a hefty Rs40 billion annually.
In the budget proposals for the Finance Bill 2025-26, the Pakistan Tea Association (PTA) has demanded change, stating that over 71,000 metric tons of tea are imported under a tax-free status granted to Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA)—regions with only 4 million people. The volume here is 1000 times greater than the actual demand based on per capita tea consumption of 1.2 kg per year.
'Tax Dodging Sucks: PTA seeks immediate withdrawal of SRO 1735'
The PTA warns that these shenanigans are breaking the formal market, draining tax revenues, and pushing legal importers out of business. The association urges the government not to extend the exemption of tea under FATA/PATA in the best national interest and suggests imposing a cap of 4 million kilograms annually to cater to the actual population-based needs.
'Maximum Retail Price: A Hidden Tax Bomb'
PTA Chairman Muhammad Altaf has mercilessly criticized the enforcement of SRO 1735(1)/2024, which imposed sales tax on tea at an absurd Maximum Retail Price (MRP) of Rs1,200 per kg, regardless of actual import prices or the form of the product. Altaf calls this MRP "a hidden tax bomb" that warrants immediate attention.
He adds that tea is being imported at varying prices—from as low as $1 per kg to over $3 per kg—yet the same Rs1,200 per kg valuation is being applied across the board. According to Altaf, taxing low-income consumers the same way as high-income ones, when tea is a daily staple across all social classes, is nothing more than fiscal piracy.
'Steeped in Flaws: The Need for Change'
The PTA has submitted a list of proposals to the government to combat misuse and restore equilibrium in tea trading. The proposals include the withdrawal of the MRP clause, abolition of export re-exports under the Export Facilitation Scheme (EFS), enhanced oversight at dry ports, and involving the PTA in verifying imports.
Additionally, the PTA has recommended tariff rationalisation to reduce tax evasion incentives. These include a reduction in Customs Duty from 11% to 5%, Regulatory Duty from 2% to 0%, Sales Tax from 18% to 10%, and Withholding Tax from 5.5% to 2%.
The PTA estimates that with rationalised tariffs and elimination of misuse, legal tea imports could skyrocket to 300 million kilograms annually, increasing tax revenues to a whopping Rs108.9 billion—a marked contrast against the current Rs68 billion.
In short, the PTA is calling BS on the current tea taxation policies, and it's time for the government to listen up and make some much-needed changes to promote fair trade and uplift the entire tea industry. It's high-time for the Tea Association to push borders and stand up to this overpriced, convoluted, and unfair tax regime!
- The Pakistan Tea Association (PTA) is urging the government to reconsider the tax-free status granted to tribal areas, as the volume of tea imported under this exemption is 1000 times greater than the actual demand.
- The PTA believes the Maximum Retail Price (MRP) imposed on tea by SRO 1735(1)/2024 is a hidden tax bomb, as it is not based on actual import prices or product forms.
- PTA Chairman Muhammad Altaf claims that taxing low-income consumers the same way as high-income ones for a daily staple like tea is fiscal piracy.
- The PTA has suggested multiple reforms to combat misuse in tea trading, including withdrawal of the MRP clause, enhanced oversight at dry ports, and involving the PTA in verifying imports.
- To reduce tax evasion incentives, the PTA has recommended tariff rationalisation, such as a reduction in Customs Duty, Regulatory Duty, Sales Tax, and Withholding Tax.
- The PTA predicts that with rationalised tariffs and the elimination of misuse, legal tea imports could increase to 300 million kilograms annually, resulting in a significant increase in tax revenues from the current Rs68 billion to a projected Rs108.9 billion.
