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.
