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Express Tribune
4 hours ago
- Business
- Express Tribune
Budget 2025-26 proposes relief for corporate, real estate sectors
Listen to article The government has proposed to slash the 'Super Tax' rate by 0.5 per cent for corporations with an annual income of Rs200 million to Rs500 million in the federal budget for the fiscal year 2025-26. Similarly, a cut in the withholding tax rate on property purchases has also been proposed. The government has also proposed a 5% hike in the tax rate on interest income, which will raise the rate from the existing 15% to 20%. High-income pensioners will also be brought under the tax net. Pensioners under the age of 70 whose annual pension is more than Rs10 million will be charged 5% tax. However, those receiving low and middle-range pensions will be exempted from this tax. Finance Minister Muhammad Aurangzeb, in his budget speech, revealed that the pension scheme had been modified through executive orders over the past few decades, which has put a burden on the national treasury. To rectify the pension scheme and reduce the burden on the kitty, the government has introduced reforms, which include discouraging early retirement and linking pension increases to the Consumer Price Index (CPI). Read more: Finance minister unveils anti-digital, pro-realty sector budget The finance minister also said that the family pension duration has been restricted to 10 years after the spouse's death, and multiple pensions have been abolished. Upon re-employment after retirement, an individual will have to choose between pension and salary. The corporate sector has been given relief in the budget with a reduction in Super Tax and withholding tax on property purchases. The government has decided to reduce the Super Tax rate for the corporate sector. The Federal Excise Duty on the transfer of commercial properties, plots, and houses has been abolished, and the federal government has decided to promote mortgage financing. Relief has been announced for the corporate sector, with a 0.5% reduction in Super Tax for companies with an annual income of Rs200 to Rs500 million. The withholding tax rate on property purchases has also been reduced. The withholding tax has been reduced from 4% to 2.5% in the first slab, from 3.5% to 2% in the second slab, and from 3% to 1.5% in the third slab. The Federal Excise Duty on the transfer of commercial properties, plots, and houses has been abolished, which was 7% in the previous budget. The federal government has decided to promote mortgage financing by announcing tax credits for houses up to 10 marlas and flats up to 2,000 square feet. Similarly, the stamp paper duty on property purchases in Islamabad has been reduced from 4% to 1%. Also read: Cabinet approves 10% salary hike for govt employees Tough decisions had to be made for economic improvement, and the tax gap was estimated at Rs5.5 trillion, which was unacceptable. Digital production tracking is being introduced for cement, fertiliser, beverages, and textiles. An artificial intelligence-based system is being introduced for sales and income tax. FinMin Aurangzeb said that revenue from the sugar sector increased by 47%, 390,000 non-filers were identified, and Rs9.8 billion in fake refund claims was blocked. From July 1, the 800-column return will be simplified to a simple format requiring only 7 basic pieces of information. There will be savings of Rs3,000 billion from agreements with IPPs (Independent Power Producers). Losses of power distribution companies have been reduced by Rs140 billion. The price of electricity has been reduced by more than 31%. Agreements with IPPs have been revised, resulting in savings of Rs3,000 billion. The government has proposed several new tax measures aimed at increasing revenue and bringing various sectors of the economy into the tax net. According to the budget document, a 5% increase in the tax rate on interest income has been decided, which will raise the rate from 15% to 20%. However, this increase will not be applicable to National Savings Schemes. The government has also decided to bring e-commerce or online businesses into the tax net. Individuals or companies selling goods or services through online platforms will be subject to tax. Moreover, tax will be imposed on goods and services ordered online. E-commerce businesses will be required to submit their monthly transaction data and tax reports to the relevant authorities. The budget has also proposed a 25% tax on income earned through debt. To ensure fair competition between imported and locally manufactured solar panels, the budget has proposed that imports of solar panels be taxed at a rate of 18%. The finance minister said that this measure will play a crucial role in promoting the local industry of solar panels in Pakistan.
Business Recorder
19 hours ago
- Business
- Business Recorder
Call to apply super tax only to corporations with profits over Rs10bn'
ISLAMABAD: Economic Policy Business Development Think Tank has strongly recommended that the Super Tax must apply only to corporations with profits over Rs 10 billion and withholding taxes on tax-filer property buyers be withdrawn to revive real estate. This has been recommended in the budget proposals (2025-26) submitted by the chairman Economic Policy Business Development Think Tank, Gohar Ejaz. The budget proposals, 'Roadmap to Economic Stability & Export-Led Growth,' he stated that 'industrialization must be our top priority. For rapid growth, we need Special Industrial Zones near major cities with full infrastructure and globally competitive Energy rates. Most importantly, our industry must be cost-competitive to win in global markets. Export Facilitation Scheme (EFS) has discriminatory policy against domestic value chain and imported products, the discrimination has led to massive closure in domestic value chain, the domestic industry must be protected.' He recommended that 'the industrialization must be our top priority. For rapid growth, we need Special Industrial Zones near major cities with full infrastructure and globally competitive energy rates. Most importantly, our industry must be cost-competitive to win in global markets.' He stressed the need for a consistent 5-Year Industrial & Export Policy. Investors need predictability. The interest rates at six percent and energy tariffs for industry at 9 cents/unit are critical to make Pakistani products globally competitive. Think Tank recommended that the exporters achieving 10 percent plus growth YoY should be offered six percent drawback of local taxes. The maximum tax rate for salaried individuals should be capped at 20 percent. Let the middle class breathe and spend. The construction is the engine of over 50 allied sectors and employs millions. It must be declared a national priority sector. Dr Gohar Ejaz also demands to provide relief to the agriculture sector. 'Agriculture is the backbone of our country. All major crops i.e. wheat, cotton, sugar cane, and maize have suffered. Farmers and agriculture must be supported with research focussed for higher productivity. The input cost must be reduced for maximum returns for farmers. To compete globally, we need Special Zones near big cities with full infrastructure and competitive rates,' the budget proposals added. Copyright Business Recorder, 2025
Business Recorder
28-05-2025
- Business
- Business Recorder
SAI submits comprehensive proposals for federal budget
ISLAMABAD: The SITE Association of Industry (SAI) has submitted comprehensive budget proposals for the Federal Budget 2025-26, advocating for policy measures to stimulate industrial growth and enhance Pakistan's export competitiveness. In budget recommendations, SAI President Ahmed Azeem Alvi and former president Riaz Uddin, who chairs the association's taxation committee, emphasized the need to transform budget-making into a strategic economic tool rather than maintaining it as a routine fiscal exercise. The industry body emphasized the institutional separation of tax policy formulation and tax administration to avoid conflicts of interest and align with global best practices. Drawing comparisons with the UK and other neighbouring countries' models, SAI suggested the establishment of a structure where tax policy rests with the Ministry of Finance, revenue sharing is managed by an independent finance commission, and consumption taxes are regulated by a dedicated council. Addressing structural weaknesses in the taxation system, SAI noted that Pakistan's income tax base remains narrow-just 9 to 10 percent of GDP- while the formal industrial sector bears a disproportionate tax burden. The association recommended widening the tax net to include all untaxed and under-taxed sectors and capping the maximum income tax rate on business income at 25 percent over the next three years. It further proposed the abolition of the Super Tax, terming it an outdated and unjust burden, and called for relief on inter-corporate and individual dividend taxation. Ahmed Azeem Alvi and Riaz Uddin expressed serious concerns about recent amendments to the Income Tax Ordinance through Ordinance IV of 2025, particularly changes to Sections 138(3A), 140(6A) and 175C of the Income Tax Ordinance. According to SAI, these amendments grant excessive powers to tax authorities and contravene Articles 4, 18, and 77 of the Constitution. The association demanded that the amendments be withdrawn immediately, arguing that they could deter compliance, encourage informality, and diminish investor confidence. Regarding sales tax reforms, SAI leaders pointed out persistent challenges due to overlapping federal and provincial jurisdictions. It proposed a harmonized General Sales Tax (GST) structure supported by a single compliance portal, enabling seamless cross-jurisdictional input tax adjustments. The association stressed the need for expeditious refund mechanisms, with refund payment orders (RPOs) to be issued within five working days of claim submission and payments processed shortly thereafter. Concerns were also raised about the prevailing 22 percent combined sales tax and further tax rate, which the association believes fuels evasion and hinders formalization of the economy. A review of the tax rate structure was urged to reduce distortions and incentivize registration. SAI Chief urged the government to implement progressive reductions in the sales tax rate, targeting a 15% rate over the next three years. The association argues that this reduction will help lower the cost of doing business for the formal tax-paying sector and promote overall economic growth. He also called for the abolition of the additional sales tax, which it claims encourages the continuation of the informal sector by allowing businesses to evade registration and tax obligations. According to the association, this perpetuates a cycle of non-compliance, hindering the formalization of the economy. Furthermore, the association recommends that sales tax exemptions on essential goods, including basic staple foods, pharmaceuticals, and education-related products, should be maintained. These exemptions are seen as crucial in providing a safety net for the common man, particularly in the face of inflationary pressures. SAI also requested the restoration of zero-rating on export facilitation schemes and educational stationery, as promised by the Finance Minister in his budget closing remarks in June 2024. The association believes that reinstating these exemptions will promote the export sector and ease financial burdens on educational institutions. In addition, the association proposed the introduction of a lower sales tax rate of 5% for other essential and deserving items to further reduce the financial strain on consumers. The industry body called for the removal of area-specific sales tax exemptions in the former tribal areas (FATA/PATA). The association stresses that such exemptions should not continue in any form, in line with the broader goal of tax uniformity and fiscal reform across the country. Ahmed Azeem Alvi and Riaz Uddin also emphasized for comprehensive reforms in Pakistan Customs, highlighting outdated legislation, tariff fragmentation, under-invoicing, and ineffective enforcement as key challenges. It recommended a revision of the Customs Act to align with WTO and WCO standards, simplification of duty structures, and adoption of a unified valuation and appraisal system. SAI advocated for the port of entry to be designated as the sole revenue collection point to prevent revenue leakage and ensure smooth inland movement of goods. On social welfare schemes, they criticized the current management of employee welfare programs (EOBI, PESSI/SESSI, WWF, and WPPF) as inefficient and outdated. The schemes largely funded by employers, offer minimal influence to contributors over fund management and disbursement. The association proposed the integration of these schemes into a unified authority with digital interfaces, central governance, and tripartite representation from employers, employees, and regulators. Disbursements, it suggested, should be made via mobile payment platforms, while health and related services could be outsourced to third-party providers. The budget proposals underscore SAI's position that economic policy should balance revenue needs with industrial growth objectives, particularly through measures that enhance Pakistan's export potential and attract productive investment. Copyright Business Recorder, 2025
Business Recorder
22-05-2025
- Business
- Business Recorder
PTC submits budget proposals to PM
ISLAMABAD: The Pakistan Textile Council (PTC) has submitted its proposals to the Prime Minister for federal budget 2025-26 meant to enhance export competitiveness, stimulate economic growth, reduce IMF dependency, empower women and support SMEs. The proposals submitted to Finance Minister and FBR are as follows: (i) reintroduction of Regionally Competitive Energy Tariff (RCET) for gas and electricity. Freeze tariff for 3 years; (ii) remove cross-subsidies; (iii) abolish 0.25% EDF surcharge on export proceeds; (iv) reduce compliances, unify regulators (e.g., KPT, shipping agents), and establish new industrial zones with one-window operations; (v) for better utilization of funds from statutory contributions, EOBI, Social Security, Labour Department, Worker welfare fund may be merged as one window operation. Rate of contribution to these institutions may be revised and decreased; (v) as the inflation is low, any minimum wage increase should not be more than 5%. Concept of Min-wage may be revised as 'fair wage' defined as 60% basic pay plus allowances;(vi) over time limit may be revised with more flexible hours as four hours in a day without weekly limits. Rate of Overtime may be revised at 1.5 of ordinary rate of basic pay (60%) per hour; (vii) Final Tax Regime (FTR) may be reintroduced for exporters;(viii) advance Tax, should be abolished otherwise it should be based on the Tax assessed for previous year as is applicable to other corporate sectors;(viii) withdrawal of Super Tax on high earners;(ix) enhancing the limit for salary payable in cash to Rs 70,000/; (ix) restore initial depreciation allowance on plants and machinery to 50% and 25% for building;(x) investment tax credit - exporters be allowed to get refund of their tax credits if any amount of credit is unutilized; (xi) Minimum Tax be phased out for listed companies;(xii) Pakistan's corporate tax rate (29%) is above regional average and may be gradually reduced to 20%, prioritizing listed firms;(xiii) no fiscal incentives exist to support green or SDG-compliant investment. Targeted reliefs and incentives to be introduced; (xiv) reduction in Further Tax under section 3 (IA);(xv) extension in time Period for Input Tax Adjustment to 12 months as delayed receipt of invoices etc.;(xvi) joint liability of Registered persons in supply chain may be removed; (xvii) exemption of Listed Companies from Section 8B;(xviii) expediting process of sales tax refunds. For overruling of the sales tax deferred refunds, the required document must be highlighted in the system which can be traced from FBR system or attach scanned copies in the system to process the refunds at earliest; (xv) clear all pending refund claims to ease liquidity crisis of exporters to fully utilized potential of increasing textile exports by $ 3-4 billion per annum; (xvi) registration and Deregistration U/s 14 be expedited and be done within a week from date of filing of application; (xvii) revision of Sales Tax Return - IRIS system may be modified in accordance with the sub sections (3) and (4) to Section 26 of the Sales Tax Act, 1990 to allow registered persons to file revised return along with tax and surcharge without seeking prior approval of the commissioner; (xviii) curtailing discretionary powers of tax officers: section 37 and section 38 may be suitably amended and prior approval of the Board be required before initiating proceedings against registered persons who are on the Active Tax Payers List; (xix) Section 37A of Sales Tax Act 1990 be amended in line with Supreme Court of Pakistan's judgement dated 4-12-2024 in case No 17653/24 which says that the power to arrest and prosecute is part of criminal proceedings and cannot be done till determination of civil liability;(xx) accessing of accounts & records should be limited to once a year as per Section 25, and audit should be conducted after scope, guidelines and mechanism of audit are provided for in Law;(xxi) 40B and 40C may be eliminated to minimize chances of corruption and direct contact between taxpayer and tax collector or only be done after completion of due process of law, including issuance of show cause notice; (xxii) restore EFS to its pre-Finance Act 2024 form, including the sales tax exemption/zero-rating on all local supplies used for export manufacturing;(xxiii) abolish 5% withholding tax on purchases by export companies; (xxiv) expand the existing 25% tax reduction policy (currently for 100% women-owned businesses) to businesses where women own less than 50% and 25% of the workforce are women; (xxiv) withdrawal of Custom Duty on industrial spare parts; (xxv) net value of product: It is proposed that custom duty may be charged at net transactional value of product. Cost of insurance, freight, port handling charges etc. may not be included in value;(xxvi) reduce dwell time at customs stations; (xxvii) use FOB for Tax purposes-Reduce input costs; (xxviii) restore Duty Drawback of Taxes (DDT) & DLTL as per Textile Policy 2020–2025; include in new 2025–2030 policy. Provide funds in the budget to clear all outstanding claims; (xxix) allocation for Export Finance Scheme (EFS) and Long-Term Financing Facility (LTFF) be enhanced and building infrastructure also be included in LTFF; (xxx) allocation for Trade/ Export Credit Insurance be enhanced and services be provided at low premium by EXIM bank along with credit against shipped goods. Strengthening EXIM Bank and funds be allocated to it to offer capital finance at 4–5% for 5–10 years, with SME-specific allocations; (xxxi) allow back-to-back Letters of Credit (LCs) for exporters; enhance SBP oversight on commercial banks; (xxxii) extend Technology Upgradation Fund (TUF) scheme till 2025 and release pending claims from 2009; and (xxxiii) interest free loans for green / sustainable technology, wastewater plants, and effluent treatment plants/machinery be provided. Copyright Business Recorder, 2025
Business Recorder
30-04-2025
- Business
- Business Recorder
OICCI seeks key tax reforms to increase tax-to-GDP ratio
KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI) has released its recommendations for the Federal Budget 2025-26, outlining a comprehensive tax reform roadmap aimed at broadening the tax base, improving compliance, facilitating investment, and enhancing FBR's revenue generation. OICCI emphasized that a more equitable contribution across all sectors, proportionate to their share of GDP, could increase the tax-to-GDP ratio to approximately 14 percent, which currently stands at less than 10 percent. Key among the recommendations is the reduction of the Corporate Tax Rate to 28 percent for FY 2025-26, with a structured plan to lower it by one percent annually, reaching 25 percent within five years. This progressive reduction will align Pakistan's corporate tax structure with other emerging economies and boost competitiveness. Unlocking country's true potential: OICCI proposes 'economic execution plan' To sustainably grow the tax base, OICCI stressed the urgent need for bringing traditionally under-taxed sectors — agriculture, real estate, and wholesale/retail trade — into the formal tax net. OICCI also recommends reducing the sales tax rate on goods to 17 percent immediately, followed by a gradual one percent annual reduction to bring it down to 15 percent, matching the regional average. Harmonization of sales tax rates between the federal and provincial governments is critical to simplifying compliance and encouraging business growth. The Chamber further calls for the gradual abolishment of the Super Tax within three years, to create a more predictable and business-friendly fiscal environment. Additionally, the OICCI highlighted the persistent challenge posed by the illegal cigarette trade, which results in tax losses exceeding Rs300 billion annually. Strict enforcement measures are necessary to plug this major revenue leakage. 'Pakistan must act decisively to modernize its tax system,' said OICCI President Yousaf Hussain. 'Our proposals are focused on creating a transparent, predictable, and equitable taxation framework that encourages economic growth, investment, and job creation.' In the energy sector, OICCI recommends that all major petroleum products be treated as taxable supplies at the appropriate sales tax rates, ensuring a fairer and broader tax contribution from the sector. OICCI also urged measures to facilitate the release of over Rs120 billion in pending tax refunds by the Federal Board of Revenue (FBR), emphasizing that consistent and transparent policy implementation is critical to building investor confidence and attracting greater foreign direct investment (FDI). One of the important OICCI's suggestions is to increase the taxable income threshold to Rs1.2 million annually per individual. However, to maintain and grow the number of taxpayers, mandatory tax filing should remain unchanged for all income earners earning in excess of Rs0.6 million. In conclusion, OICCI Secretary General M. Abdul Aleem added, 'With the right reforms and policy consistency, Pakistan can significantly expand its revenue base, restore business confidence, and position itself as a more attractive destination for investment.' The OICCI remains committed to supporting the government in developing policies that promote economic prosperity and sustainable growth. Copyright Business Recorder, 2025
