Govt Considers Tax Relief and Expanding Tax Base

The Government of Pakistan is currently evaluating potential fiscal measures aimed at providing relief to salaried individuals, alongside initiatives to broaden the national tax base by incorporating the retail and wholesale sectors into the formal taxation framework. These considerations were highlighted by Minister of State for Finance Bilal Azhar Kiani during a consultative session with the Overseas Investors Chamber of Commerce and Industry (OICCI).

The discussion formed part of the ongoing federal budget formulation process, during which proposals submitted by foreign investors and business stakeholders are being reviewed. The Minister emphasized that feedback from chambers of commerce and industry representatives is being actively integrated into policy deliberations, while reaffirming the government’s commitment to maintaining a stable and investment-friendly fiscal environment. He further indicated that efforts are underway to simplify the tax regime in order to facilitate economic activity and improve compliance.

OICCI, in its submissions, advocated for the development of a more equitable and inclusive taxation system. The chamber stressed the importance of expanding the tax net to include traditionally under-taxed or undocumented sectors such as agriculture, retail and wholesale trade, real estate, and services, thereby distributing the tax burden more evenly across the economy.

Among its key recommendations, OICCI proposed a reduction in the corporate tax rate to 28% for the fiscal year 2026–27, followed by a gradual decrease to 25% over a three-year period. It also called for the phased elimination of the super tax within the same timeframe.

The chamber highlighted that the cumulative impact of corporate tax, super tax, Workers Welfare Fund (WWF), and Workers Profit Participation Fund (WPPF) elevates the effective tax rate to approximately 46%, which adversely affects business competitiveness and investment attractiveness.

Additionally, OICCI expressed concerns regarding the high tax burden imposed on the banking sector, cautioning that excessive taxation may constrain lending capacity and increase the cost of capital for businesses, thereby impacting overall economic growth.

In relation to salaried taxpayers, the chamber recommended the abolition of the existing 10% surcharge applicable to higher-income individuals and proposed capping the maximum personal income tax rate at 25%, with the objective of reducing the fiscal burden and enhancing disposable income levels.