The Pakistan Business Council (PBC), a leading advocate for Pakistani businesses, has urged the government to scrap the 1% Capital Value Tax (CVT) on foreign assets held by Pakistani residents.
Key Concerns Raised by PBC:
- Double Taxation: The PBC argues that individuals already pay income tax on any income generated from their foreign assets. The additional CVT creates a double taxation burden.
- Discouraging Talent Return: The tax disincentivizes skilled professionals working abroad from returning to Pakistan due to the annual levy on their accumulated assets. This results in “brain drain” as the country loses expertise in various fields.
- Impact on Families: The CVT discourages Pakistanis abroad from relocating back to be closer to family, as some may choose to send money for support instead of returning themselves due to the tax.
- Entrepreneur Disincentive: The tax encourages entrepreneurs to spend more time outside Pakistan, potentially hindering local business development and investment.
- Risk of Capital Flight: The PBC warns that stricter measures to enforce the CVT could push individuals to renounce their Pakistani citizenship and move their assets elsewhere.
Potential Consequences of CVT:
- Reduced Investment: The tax could discourage investment in Pakistan, both from returning professionals and established businesses.
- Loss of Expertise: “Brain drain” could deprive Pakistan of valuable skills and experience.
- Weakened Family Ties: The financial burden may hinder family reunification efforts.
PBC’s Proposal:
The Pakistan Business Council recommends eliminating the 1% CVT on foreign assets to incentivize talent repatriation, investment, and overall economic growth.
Looking Ahead:
The government is yet to respond to the PBC’s proposal. The impact of the CVT on investment and talent mobility remains to be fully assessed. Businesses and individuals await a decision on the future of this tax policy.
