Foreign investors in Pakistan are urging the government to scrap the super tax in the upcoming budget for the fiscal year 2024-25. This move, they believe, would boost investor confidence and stimulate economic growth.
Concerns Over Super Tax
The Overseas Investors Chamber of Commerce and Industry (OICCI), representing foreign investors, has submitted proposals advocating for the abolition of the super tax levied under Section 4C of the Income Tax Ordinance.
Foreign investors argue that the super tax unfairly burdens a small group of compliant high-tax payers. They believe it discourages investment and makes Pakistan a less competitive destination compared to regional peers.
Seeking a More Appealing Investment Climate
The OICCI emphasizes that eliminating the super tax would send a positive message to investors. This, in turn, would foster a more attractive business environment and ultimately lead to increased economic activity and development.
Maintaining Corporate Tax Rate Stability
Beyond the super tax, foreign investors also recommend maintaining the current corporate tax rate of 29%. They argue that any increase would further erode Pakistan’s competitiveness, potentially hindering business growth and investment.
Background: Gradual Corporate Tax Reduction Plans
It’s important to note that the 2019 Finance Act previously proposed a gradual reduction of the corporate tax rate to 25%. However, foreign investors are advocating for maintaining the current rate to ensure stability and predictability, particularly in the face of current economic challenges.
Policymakers Weighing Options
As budget discussions move forward, the demands of foreign investors are likely to be a key point of consideration. Policymakers will need to weigh the potential benefits of attracting foreign investment against the need for tax revenue.
This issue highlights the ongoing challenge of balancing investment attractiveness with fiscal needs. The upcoming budget decision will be closely watched by businesses and investors alike.
