Government Reviews Cotton Tax, Expands Tax Base 2025

Parliamentary Secretary for Finance and Revenue Saad Wasim Sheikh informed the National Assembly on May 12, 2025, that the government is reviewing the 18% sales tax on locally produced cotton for the upcoming federal budget, calling it unfortunate that this high tax rate burdens domestic producers while imported cotton under the Export Facilitation Scheme remains exempt. This disparity has sparked debate over tax fairness, with Saad Wasim insisting, “There should be no discrimination,” and advocating for uniform taxation on both local and imported cotton.

He revealed that a recent meeting between the finance minister and cotton ginners explored removing the sales tax on local cotton entirely, while retaining the 18% tax on imports—though the exemption applies only to Export Facilitation Scheme-registered importers. On tax compliance, he noted the Federal Board of Revenue has registered 2,391,566 new taxpayers through the Tax Laws Amendment process, with tax return filers reaching 6,594,832 by April 29, 2025, including 106,118 Association of Persons and 93,749 companies. Additionally, mobile phone companies collected Rs 84.25 billion in taxes from July 2024 to March 2025, deposited into the national treasury, while Roshan Digital Accounts hit 805,009, attracting $9.98 billion from overseas Pakistanis in 10 foreign currencies.

Web context highlights ongoing tax reform debates, with posts found on X reflecting mixed reactions—some praising the tax base expansion, others questioning the cotton tax disparity. Critically, the narrative of fair taxation may be undermined by implementation gaps—web sources suggest exemptions favor imports, and X sentiment raises doubts about equitable enforcement, suggesting potential policy challenges ahead.