PM Directs FBR to Cut Taxes After Rs274B Shortfall

ISLAMABAD: Prime Minister Shehbaz Sharif has ordered the Federal Board of Revenue (FBR) to devise radical tax cuts after a Rs274 billion revenue shortfall in the first four months, aiming to mirror regional tax regimes and stem capital flight and brain drain, per The Express Tribune.

The FBR is crafting models to slash income and sales tax rates, potentially pumping Rs1.1 trillion back into the economy via relief for businesses and individuals. Proposals include dropping corporate tax from 29% to 25%, capping individual tax at 25% from 45%, scrapping the 10% super tax, eliminating the 15% inter-corporate dividend tax, and cutting general sales tax from 18% to 15%.

The fiscal hit could reach Rs1.1 trillion annually, with Rs600 billion from sales tax alone. The plan is embryonic and faces multiple reviews, but officials deem implementation pre-IMF bailout end improbable due to Fund opposition to revenue erosion.

Officials conceded high rates failed to meet targets, yet burdened companies and salaried workers. Excessive advance taxes stifled investment and fueled capital outflows. FBR data shows withholding tax on salaried individuals soared 55% to Rs605.6 billion last year—second only to contracts—after slab consolidation and rate hikes.

The government seeks a competitive, growth-centric tax system post-IMF, balancing fiscal stability.