PBC Asks Govt to Phase Out Super Tax by 2% Annually

The Pakistan Business Council (PBC) has asked the budget markers to phase out Super Tax by 2 percent annually until it is phased out totally for non-export profits. The budget proposals of the PBC said that the Super Tax on profit arising from exports should be halved in 2025-26 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. Listed companies with a minimum float of 25 percent in a year may be taxed at a 1 percent lower corporate tax rate, PBC recommended. 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, it said. An advance tax of 39 percent 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, PBC recommended. The tax rate on the formal corporate sector should be reduced gradually by 1 percent annually until it reaches 25 percent, which is in line with other emerging economies, it added. Multiple taxation on inter-corporate dividends should be discontinued to encourage scale, diversification, and to grow the capital market and widen shareholding, PBC said. PBC has also asked to reduce the tax burden on salaried employees to stem the brain drain and loss of talent to the informal sector. The major thrust of the PBC is the revival of manufacturing, agriculture and the services sectors, supported by formalization of the economy. PBC said the faulty tax construct on banks not achieving a 50 percent advance-to-deposit ratio (ADR) failed to sustainably broaden lending to the private sector and had to be withdrawn. It said that another example of an ill-thought measure is the imposition of the Capital Value Tax on the declared overseas assets. This is contested in the Supreme Court and is yielding very little tax revenue, but it is causing wealthy people to leave the country, with some giving up their Pakistan passports. This does not augur well at a time when we are trying to attract FDI. Indiscriminate taxing of cellular and fixed internet connectivity is impeding the growth of the knowledge economy, PBC’s budget proposals added.