PBC Pitches Lower Corporate Tax Rates, Revision of Super Tax in Budget Proposals 

Pakistan Business Council (PBC) has laid down seven key strategic imperatives of fiscal policy for next fiscal year (2025-26), lower corporate tax rates, revision of Super Tax on high income earners and support to sectors in which Pakistan has a comparative advantage.  The budget proposals revealed seven strategic imperatives of fiscal policy: Grow business to grow the tax revenue and meet economic and social objectives; equitably distribute the tax burden; levy taxes at competitive rates; provide long-term policy predictability; tax profit, not turnover or assets; simplify, unify, harmonize, and digitize returns and minimize impact on the cash flow of business.  The government should reduce super tax rate on non-export profit by 2 percent per annum and levy Super Tax progressively on slabs, the PBC recommended.  PBC said that, “A tax-to-GDP ratio is not the objective but an outcome of sound fiscal policy, which responds to the country’s long-term objectives to promote investment, create jobs, support exports, and competitively reduce import reliance. Thus, it helps to achieve sustainable and equitable growth in the GDP.  It proposed to encourage investment through corporatization & listing, widen & encourage longer-term shareholding, promote scale, consolidation, and diversification and support exports and indigenization”.  It suggested that all resident tax return filers should be required to submit wealth reconciliations. The formal sector’s responsibility to verify tax credentials should be limited to its direct FBR registered suppliers and customers as displayed on the FBR portal.  An advance tax of 39% should be levied on non-filer commercial and industrial customers’ electricity and gas bills, followed by disconnection of utility connections.  It recommended that the gain on sale of land should be taxed @ 39% if disposed within 10 years of purchase. Reduced rate of 15% be allowed incase holding period exceeds 10 years. Presently, 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).  The PBC recommended phasing out tax concessions, such as for elsewise tribal areas and FBR should enter into Electronic Data Interface (EDI) arrangements with major trading partners.  The PBC has recommended reduction in tax rate on the formal corporate sector by 1% annually till it reaches 25%, in line with other emerging economies. It also recommended reduction in GST rate by 1% annually until it reaches 15%.  Other policy recommendations included phase out the minimum turnover tax for listed companies in initial phase and future taxation should not be based on the balance sheet of banks or companies.  The FBR should tax income, not the declared overseas assets of Pakistan tax residents. The policy recommendations also included reduction in withholding tax (WHT), on exporters from 2% to 1% and rationalize WHT on the services sector.  The government should reduce WHT on recyclable materials fora level playing field with the informal sector. The exemption of listed companies from Section 8B of the Sales Tax Act 1990 which limit offset of input tax to 90% of output tax, the budget proposals added.