Pakistan Business Council Calls for “Super Tax” Reform – Finance Bill 2024

The Pakistan Business Council (PBC) is urging the Federal Board of Revenue (FBR) to reconsider the “super tax” imposed on documented businesses in the 2022 Finance Act. The PBC proposes a series of reforms for the upcoming 2024-25 budget.

Key Concerns with the Super Tax:

  • Retroactive Implementation: The PBC argues the super tax unfairly penalizes documented businesses that contribute significantly to job creation, disposable income, and tax revenue.
  • Lack of Progression: The current flat-rate tax on all profits exceeding a specific threshold is seen as unfair compared to a progressive tax system.
  • Uncertainty and Discouragement: The lack of a defined timeframe for the super tax creates uncertainty for businesses and discourages reinvestment.

Proposed Reforms by PBC:

  • Progressive Tax Structure: The PBC advocates for a progressive super tax system, with higher rates applied to larger profits.
  • Targeted Elimination: They propose eliminating the super tax entirely for specific industries, particularly those focused on exports and import substitution, to incentivize growth.
  • Reduced Overall Tax Burden: Highlighting the high effective tax rate on individual shareholders (nearly 68%), the PBC suggests lowering the overall tax burden to encourage reinvestment.
  • Benchmarking with Regional Competitors: The PBC points out that neighboring countries like Bangladesh, India, Vietnam, and Egypt don’t have a similar super tax, potentially putting Pakistani businesses at a disadvantage.

The PBC’s proposals aim to create a more equitable and growth-oriented tax system. Whether these suggestions are implemented in the upcoming budget remains to be seen, but the issue of the super tax is likely to remain a point of discussion.

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