Islamabad: The Pakistan Business Council (PBC) has urged the Federal Board of Revenue (FBR) to gradually reduce the general sales tax (GST) rate by 1% annually until it reaches 15%, citing concerns that the current 18% rate incentivizes tax evasion in an undocumented economy.
In its budget proposals for FY26, the PBC also called for a reduction in withholding taxes for exporters to ease cash flow challenges and improve business sustainability. Additionally, it recommended lowering the corporate tax rate by 1% per year until it reaches 25%, aligning with tax structures in other emerging economies.
The council criticized multiple taxation on inter-corporate dividends, arguing that it discourages consolidation, diversification, and stock market growth. It also highlighted the heavy tax burden on salaried employees, stating that they pay significantly more than their counterparts in India, which is driving talent abroad or into the informal sector.
The PBC further warned that the FBR’s focus on auditing high taxpayers instead of broadening the tax base is harming businesses and investor confidence. It emphasized the need to separate tax policymaking from tax collection, proposing that key ministries and the private sector be included in a Policy Board to ensure long-term, growth-oriented fiscal policies.
Additionally, the council pointed out structural flaws in the current tax system, which relies on turnover-based taxation instead of profits, leading to unfair burdens on loss-making and well-governed listed companies. It also criticized the withholding of tax refunds and the imposition of taxes on digital connectivity, saying such measures hinder economic growth.
PBC acknowledged the constraints of the ongoing IMF program but stressed the need for a phased reform agenda to create a more predictable and business-friendly tax environment.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
