Pakistan’s textile industry accused of massive tax evasion

Pakistan's textile industry, from cotton ginning to retail, is allegedly evading almost Rs 236 billion in taxes annually, according to the Pakistan Cotton Ginners Association (PCGA). Ginning sector alone is responsible for Rs 36 billion evasion, with the remaining lost revenue spread across other stages of the textile value chain.

The PCGA blames excessive taxation for driving the industry underground. The ginning sector faces 12 different taxes and duties, including multiple sales taxes, income tax, and various fees. This heavy burden has forced the closure of nearly half of the country's ginning factories.

The introduction of sales tax on cotton seed cake is seen as a tipping point. This, combined with increased electricity costs, threatens to collapse the entire ginning industry. The PCGA warns this will harm farmers and lead to increased undocumented transactions throughout the textile supply chain.

As a result of rampant tax evasion, the government is losing billions in revenue, exacerbating Pakistan's financial crisis.