ISLAMABAD: Pakistan Business Council (PBC) has handed over it Charter of Demands (CoDs) to the Federal Government to resolve the issue of business community and investors, to be considered at the time of federal budget 2025-26.
Sharing its demands with Finance Minister and Commerce Minister, PBC has said that legitimate and competitive profit-making and wealth creation should be encouraged to grow the source of tax revenue, generate employment, and achieve a sustainable trade balance. Fiscal policy should also be used to direct investment into sectors of the future.
In this regard, following recommendations have been shared with the decision makers
(i) listed companies with a minimum float of 25% in a year may be taxed at a 1% lower corporate tax rate
(ii) super tax should be phased down by 2% annually until it is phased out totally for non-export profits. Super tax on profit arising from exports should be halved in FY26 and removed entirely in three years. In the meantime, the super tax rate should apply progressively on a marginal basis for each profit slab. Profit slabs/thresholds should also be revised to take inflation into account
(iii) new exporters achieving a minimum export level of 15% of their annual turnover be subjected to 1% lower corporate tax rate on the audited profit arising from such incremental exports
(iv) existing exporters that increase their exports by 15% on the prior year should be subject to 0.5% WHT on export proceeds and 1% lower corporate tax rate on the profit arising from incremental exports
(v) businesses reducing their audited reliance on direct and indirect imports by 15% on the previous year be allowed a lower corporate tax rate of 1% on their entire profit for that year
(vi) long-term investment in listed companies be encouraged by exempting capital gains tax after a three-year holding period
(vii) promote corporatization by exempting gains arising from the sale of shares of non-listed companies after a holding period of 10 years
(viii) as bonus shares merely divide the shareholders’ funds by a larger number of issued shares without increasing the aggregate intrinsic value, tax on bonus shares should be withdrawn
(ix) when an industrial policy becomes available, consider selective, conditional, and limited-time support for sectors that can become export competitive and/or sustainably reduce import reliance
(x) rationalize advance taxes on cellular and fixed internet services to relieve those earning below the taxable income threshold (xi) restore the pass-through tax treatment of income and gains from investment through private equity and venture capital.
Equitable distribution of the tax burden:
(i) address people, processes, and technology to broaden the tax base. Share the progress with current taxpayers to assure them that the tax base is being broadened.
(ii) all resident tax return filers should be required to submit wealth reconciliations
(iii) the responsibility of the formal sector to verify the tax credentials should be limited to its direct FBR registered suppliers and customers as displayed on the FBR portal
(iv) an advance tax of 39% should be levied on the electricity and gas bills of commercial and industrial customers that are not filers of tax returns. After a period, their utility connections should be disconnected
(v) gain on disposal of land is taxed @ 15% irrespective of holding period whereas profit earned by companies is taxed @ 46% (29% tax, 10% super tax, 2% WWF and 5% WPPF)
(vi) gain of land should be taxed @ 39% if disposal is made within 10 years of purchase. Reduced rate of 15% be allowed incase holding period exceeds 10 years
(vii) phase out tax concessions, such as those for FATA and PATA, that create an uneven playing field for the formal sector
(viii) enter into Electronic Data Interface (EDI) arrangements with major trading partners
(ix) anonymized visibility of import declarations would serve as a check on under-invoicing without compromising confidentiality.
Regionally competitive tax rates :
(i) gradually reduce the GST rate by 1% until it reaches 15%
(ii) the tax rate on the formal corporate sector should be reduced gradually by 1% annually until it reaches 25%, which is in line with other emerging economies
(iii) multiple taxation on inter-corporate dividends be discontinued to encourage scale, diversification, and to grow the capital market and wide shareholding
(iv) reduce the tax burden on salaried employees to stem the brain drain and loss of talent to the informal sector. Revise the slabs to adjust for inflation.
Long-term, predictable policy:
(i) separate policy-making from collection of taxes
(ii) ensure that taxpayers representatives and the ministries of planning, industries, investment, and commerce are represented on the policy board so that the fiscal policy is aligned with other policies
(iii) grandfather existing investors from a change in tax policy if there remains an unexpired period of benefit under the previous policy, when investment was made.
Tax profit, not turnover or assets:
(i) starting with listed companies, phase out the minimum turnover tax
(ii) future taxation should not be based on the balance sheet of banks or companies
(iii) tax income, not the declared overseas assets of Pakistan tax residents.
Simplified, uniform & digitized tax returns:
(i) establish a fully functional National Tax Authority (NTA) to serve as a single-window assessment platform for taxpayers
(ii) taxes collected through the NTA should be transferred immediately to federal and provincial authorities based on a predefined and mutually agreed-upon mechanism. This will streamline compliance, reduce administrative burden, and enhance efficiency in tax collection and distribution.
Minimise impact on cash flow of business especially of exporters:
(i) reduce WHT, on exporters from 2% to 1% and rationalise it on the services sector to minimise the cash flow impact
(ii) reducing excessive withholding taxes on recyclable and waste materials is essential to achieving a level playing field with the informal sector and would help deliver sustainable development goals
(iii) Section 8B of the Sales Tax Act 1990 limiting the offset of input tax to 90% of output tax should not apply to listed companies
(iv) the current monthly threshold of 50% exports under Section 8B for offset of input sales tax is excessively high, depletes the cash flow, and impedes exports. A reduction to 10% is recommended
(v) the issue of Exemption Certificates to taxpayers who have paid their quarterly advance income tax should be restored. Despite paying the quarterly advance income tax, taxpayers now suffer a 1% withholding tax on their supplies. This is conceptually flawed, and it also impedes their cash flow
(vi) the limit on processing GST refunds should be harmonized for both the erstwhile zero-rated and non-zero-rated sectors to promote the broadening of the export basket
(vii) the existing provision in tax law should be activated to allow the offset by taxpayers of admitted income tax refunds against the current year’s tax liability
(viii) the zero GST rating on supplies by local suppliers to exporters under the Export Facilitation Scheme should be restored to encourage exporters to use local inputs
(ix) review and reduce advance tax on export proceeds to 0.5% for low-margin exports, especially on those by small and medium-sized exporters who lack the stamina to wait for eighteen months to receive a tax refund.
