ISLAMABAD: The Pakistan Business Council (PBC) has recommended separation of tax policy from the Federal Board of Revenue (FBR), establishment of National Tax Authority (NTA), changes in super tax regime, reduction in corporate and sales tax rates by one percent per annum, revision of tax slabs to adjust for inflation and reduction in tax burden on salaried employees in the coming budget (2025-26).
According to the policy recommendations of the PBC for the next fiscal year, the government should separate policy-making from collection of taxes and 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.
The PBC’s policy recommendations also included to establish a fully functional NTA to serve as a single-window assessment platform for taxpayers and 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.
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The government should reduce super tax rate on non-export profit by two percent per annum and levy super tax progressively on slabs.
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 percent 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 of sale of land should be taxed @ 39 percent if disposed within 10 years of purchase. Reduced rate of 15 percent be allowed incase holding period exceeds 10 years. Presently, gain on disposal of land is taxed at 15 percent irrespective of holding period, whereas, profit earned by companies is taxed at 46 percent (29 percent tax, 10 percent super tax, two percent WWF and five percent WPPF). The PBC recommended phasing out tax concessions, such as for else wise tribal areas and the 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 one percent annually till it reaches 25 percent, in line with other emerging economies. It also recommended reduction in GST rate by one percent annually until it reaches 15 percent.
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 two percent to one percent and rationalise 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 percent of output tax.
The current monthly export threshold of 50 percent under Section 8B for offset of input tax is high, depletes the cash flow, and impedes exports. A reduction to 10 percent is recommended.
The Exemption Certificates for those paying quarterly advance income tax should be restored. The limit on processing GST refunds should be harmonised for both the erstwhile zero-rated and non-zero-rated sectors to promote the broadening of the export basket.
Copyright Business Recorder, 2025
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