FY2026-27 budget: PSCTF calls for structural tax reforms

KARACHI: Pakistan SADC Chamber Trade Federation (PSCTF) has urged the federal government to undertake wide-ranging structural tax reforms in the FY2026-27 budget, advocating a shift from what it termed an “extractive revenue collection model” to a growth-oriented framework focused on investment, exports, industrial expansion and job creation.

In a set of budget proposals submitted to the Ministry of Finance and the Federal Board of Revenue (FBR), the PSCTF said Pakistan’s economy continues to face deep-rooted structural challenges, including a low tax-to-GDP ratio, elevated energy costs, constrained industrial productivity and a widening trade deficit. SADC stands for Southern African Development Community.

PSCTF’s Convener of Pakistan Chapter Syed Moizuddin shared with Business Recorder that among its key recommendations, the forum called for the restoration of the Final Tax Regime (FTR) for goods exporters, arguing that the current taxation framework has created liquidity pressures and increased compliance costs for export-oriented industries. It said a predictable tax regime would improve cash flows and enhance Pakistan’s export competitiveness in international markets.

The PSCTF also proposed a legally binding mechanism requiring the FBR to process and disburse all valid export-related sales tax refunds within 30 to 45 days. Delayed refunds, it noted, continue to lock up billions of rupees in industrial working capital, undermining production and export growth.

For improving Pakistan’s investment climate, the forum recommended a phased abolition of the Super Tax on corporations and a gradual reduction in the standard corporate income tax rate from 29 percent to 25 percent over the coming years. Such measures, it argued, would encourage business expansion, attract foreign direct investment and improve regional competitiveness.

For the salaried class, the proposals seek an increase in the annual tax-exempt income threshold from Rs600,000 to Rs1.2 million, citing inflationary pressures and rising living costs that have eroded disposable incomes and accelerated the migration of skilled professionals abroad.

Syed Moizuddin said the forum has emphasized long-term policy certainty for the information technology sector by maintaining the concessional tax regime for IT and IT-enabled services exports, describing predictability as essential for sustaining growth in one of Pakistan’s fastest-growing export industries.

To broaden the tax base, the PSCTF advocated greater use of digital technology and data analytics, including cross-referencing banking, property, utility and travel records to identify undocumented income and bring non-filers into the formal economy. It also urged stricter enforcement of point-of-sale integration across the retail sector.

In support of industrial modernization, the proposals recommend zero customs duty and sales tax on imports of non-locally manufactured industrial machinery, automation equipment and renewable energy technologies, measures the forum says would boost productivity and accelerate Pakistan’s transition toward cleaner energy sources.

The PSCTF also proposed the introduction of a National Taxpayer Compliance Rating System, under which compliant taxpayers would receive incentives such as faster refunds, fewer audits and lower withholding tax rates. Additional tax credits were suggested for companies generating employment and investing in university-led research, innovation and workforce development.

PSCTF’s Convener pleaded that while some measures may have a limited short-term fiscal impact, they would generate substantial long-term benefits by expanding the tax base, increasing exports, encouraging investment, creating jobs and raising Pakistan’s tax-to-GDP ratio.

The recommendations come as the government prepares to unveil the federal budget for FY2026-27 amid efforts to balance fiscal consolidation with economic growth, export promotion and private-sector development.

Copyright Business Recorder, 2026