The Pakistan Business Council (PBC) has outlined seven strategic imperatives for fiscal policy in its budget proposals for the upcoming fiscal year 2025-26. The recommendations focus on reducing corporate tax rates, revising the Super Tax on high-income earners, and supporting sectors where Pakistan holds a comparative advantage to promote sustainable economic growth.

Seven Strategic Imperatives

The PBC’s proposals emphasize the following key fiscal policy objectives:

1. Growing businesses to increase tax revenue and achieve economic and social goals.
2. Equitably distributing the tax burden.
3. Levying taxes at competitive rates.
4. Providing long-term policy predictability.
5. Taxing profits instead of turnover or assets.
6. Simplifying, unifying, harmonizing, and digitizing tax returns.
7. Minimizing the impact of taxes on business cash flow.

Recommendations on Super Tax and Corporate Tax

The PBC has recommended reducing the Super Tax rate on non-export profits by 2 percent annually and applying it progressively on income slabs. It also proposed reducing the corporate tax rate for the formal sector by 1 percent annually until it reaches 25 percent, aligning with other emerging economies. Additionally, the council suggested reducing the General Sales Tax (GST) rate by 1 percent annually until it reaches 15 percent.

Taxation on Land and Utilities

The PBC proposed taxing gains on the sale of land at 39 percent if disposed of within 10 years of purchase, with a reduced rate of 15 percent for holding periods exceeding 10 years. Currently, land sales are taxed at 15 percent regardless of the holding period, while corporate profits are taxed at a combined rate of 46 percent, including corporate tax, Super Tax, and other levies.

To address tax evasion, the PBC recommended imposing a 39 percent advance tax on non-filer commercial and industrial customers’ electricity and gas bills, followed by disconnection of utility services for non-compliance.

Encouraging Investment and Formalization

The council emphasized the need to promote investment through corporatization, listing, and longer-term shareholding. It also called for policies to encourage scale, consolidation, diversification, and support for exports and local production to reduce import reliance.

The PBC suggested phasing out tax concessions for certain areas, such as erstwhile tribal regions, and urged the Federal Board of Revenue (FBR) to establish Electronic Data Interface (EDI) arrangements with major trading partners to improve transparency and efficiency.

Other Key Recommendations

• Wealth Reconciliation: All resident tax return filers should submit wealth reconciliations.
• Withholding Tax (WHT): Reduce WHT on exporters from 2 percent to 1 percent and rationalize WHT on the services sector.
• Recyclable Materials: Reduce WHT on recyclable materials to create a level playing field with the informal sector.
• Sales Tax Act: Exempt listed companies from Section 8B of the Sales Tax Act 1990, which limits the offset of input tax to 90 percent of output tax.
• Turnover Tax: Phase out the minimum turnover tax for listed companies.
• Overseas Assets: Tax income, not declared overseas assets, of Pakistan tax residents.

Focus on Sustainable Growth

The PBC stressed that a higher tax-to-GDP ratio should be the result of sound fiscal policy, not its primary objective. It argued that fiscal policy should focus on promoting investment, creating jobs, supporting exports, and reducing import reliance to achieve sustainable and equitable GDP growth.