PTBA Pushes for Digital Revolution in Pakistan’s Tax System for Budget 2025-26

The Pakistan Tax Bar Association (PTBA) has unveiled its comprehensive tax proposals for the federal budget 2025-26, placing digitalization at the forefront of its recommendations. The association’s vision emphasizes a complete overhaul of the tax system through digital integration, aiming to broaden the tax base, improve documentation, address systemic inefficiencies, and ultimately foster a more sustainable and equitable economy. PTBA argues that a digitized tax system is the cornerstone of transparency, accountability, and sustainable economic growth.¹

Core Principles: Expanding the Tax Base and Protecting Taxpayers

PTBA stresses the urgent need to expand Pakistan’s tax base, ensuring all economic sectors contribute proportionally to the nation’s GDP. Simultaneously, they advocate for the protection of genuine taxpayers from undue burdens and administrative inefficiencies. The association firmly believes that a well-documented and digitized tax system is the key to achieving this balance, paving the way for a responsible and transparent economy.

Direct Tax Proposals: Modernization and Simplification

PTBA’s direct tax proposals focus on modernizing and simplifying tax collection processes to encourage greater compliance. Key recommendations include:

• Universal Income Taxation: Expanding the taxpayer base to 50 million individuals by taxing all forms of income.
• Uniform Taxation for Salaried Individuals: Streamlining the tax structure for salaried employees.
• Fixed Tax on Pensions: Introducing a 10% fixed tax on pensions exceeding PKR 100,000.
• Automated Exemption Certificates: Automating the issuance of exemption certificates within 15 days.
• Abolition of Section 7E: Recommending the repeal of Section 7E of the Income Tax Ordinance.
• Repeal of CVT on Foreign Assets: Advocating for the removal of the Capital Value Tax (CVT) on foreign assets.
• Fair Assessments: Ensuring fair and transparent assessments under Section 122 of the Ordinance.
• Federal Taxation of Agricultural Income: Bringing agricultural income under the federal government’s tax jurisdiction.
• Automated Refund Issuance: Streamlining and automating the tax refund process.

Indirect Tax Proposals: Promoting Compliance and Digital Payments

In the realm of indirect taxes, PTBA proposes:

• Universal POS Systems: Implementing Point of Sale (POS) systems at all levels of trading to enhance transaction tracking.²
• Single-Digit Sales Tax: Reducing the sales tax rate to a single-digit 6% to incentivize compliance.³
• Reduced Sales Tax for Online Transactions: Promoting digital payments by offering a reduced sales tax rate for online purchases.

Digitalization and AI: The Heart of Tax Reform

PTBA’s proposals heavily emphasize the integration of Artificial Intelligence (AI) and digitalization to revolutionize tax collection. Key recommendations in this area include:

• Digital Invoicing: Implementing digital invoicing systems to track transactions across the entire supply chain.
• NADRA Integration: Leveraging the technological capabilities of the National Database and Registration Authority (NADRA) to identify taxable entities.
• International Collaboration: Partnering with reputable international service providers to streamline digital tax collection processes.

PTBA believes that a digitized oversight mechanism will empower the Federal Board of Revenue (FBR) to strengthen governance, minimize tax evasion, and simplify compliance. They argue that a digital-first approach will reduce cash-based transactions and create a robust audit trail for tax authorities.

General Recommendations: Transparency and Taxpayer Facilitation

Beyond the specific tax proposals, PTBA has also made several general recommendations:

• Enhanced Taxpayer Facilitation: Improving services and support for taxpayers at all stages of the tax process.
• Transparent Revenue Allocation: Advocating for transparent allocation of tax revenues to critical sectors like health, education, infrastructure, and transportation.⁴
• Public-Private Partnerships: Encouraging public-private partnerships for government hospitals and schools to improve service delivery.
• Transparency of Public Officials’ Tax Returns: Proposing that tax returns of government officials, politicians, and judges be made accessible under the Right to Information (RTI) Act.
• Revised FBR Salary Packages: Suggesting revisions to the salary packages of FBR officials to boost morale and efficiency.

A Roadmap for a Modern Tax System

PTBA’s comprehensive proposals offer a detailed roadmap for digitalizing Pakistan’s tax system.⁵ The association’s vision aims to ensure that all eligible citizens contribute to the national treasury while simultaneously benefiting from transparent and equitable tax policies. By embracing digitalization and prioritizing taxpayer facilitation, PTBA believes Pakistan can build a more robust and sustainable economic future.