The Overseas Investors Chamber of Commerce and Industry (OICCI) has highlighted the significant challenges posed by Pakistan’s complex tax regime, which is seen as a major deterrent for investors.
The OICCI also stated the importance of digitalization and enhancing the Federal Board of Revenue’s (FBR) research capabilities. These measures are crucial for identifying potential taxpayers and addressing income discrepancies, which could potentially unlock Rs. 3-4 trillion in tax revenue for the fiscal year 2025.
The OICCI’s analysis points to the country’s withholding tax system, which includes over 200 classifications with varying rates for active and non-active taxpayers. Despite this complexity, less than half of these sections account for 94% of the revenue, indicating that such extensive classifications are unnecessary.
To address these issues, the OICCI recommends a series of reforms aimed at simplifying the tax regime. Key proposals include harmonizing sales tax rates across all jurisdictions and sectors, implementing a single sales tax return for all sectors—similar to the model used in the telecom sector—and reducing the frequency of tax return filings to ease compliance burdens on businesses.
By streamlining the tax system, Pakistan could broaden its tax net, attract more investment, and significantly boost its revenue, thereby addressing some of the key challenges faced by business owners in the country.
