The Pakistan Business Council (PBC) proposed several changes to the minimum tax for listed companies in the upcoming budget:
Elimination of Minimum Tax: The PBC recommends completely removing the minimum tax requirement (currently 1.25% of turnover) for listed companies.
Gradual Reduction Proposal: As an alternative, they suggest a gradual reduction of 0.25% annually until it reaches 0.5% by the 2027 tax year.
Extending Carry Forward Period: The current limit allows unused minimum tax to be used against future taxes for 3 years. The PBC proposes extending this period indefinitely or to a more reasonable timeframe like 10 years. This is particularly helpful for startups and companies with high initial investments.
Refunding Excess Minimum Tax: The PBC recommends that companies that paid more minimum tax than their actual tax liability in the past two years should be eligible for a refund, especially if they are incurring losses.
Reasons for the Proposal:
- The PBC argues that the current minimum tax rate is too high and doesn’t reflect business realities.
- The 3-year limit on carrying forward unused minimum tax is especially burdensome for startups and companies facing initial losses.
- Reimbursement of excess minimum tax would provide relief during economic downturns.
Potential Benefits:
- Reduced tax burden for listed companies could lead to increased profitability and reinvestment.
- This could stimulate economic growth and encourage long-term planning for businesses.
Overall, the PBC’s proposal aims to create a more supportive tax environment for listed companies in Pakistan, potentially leading to a stronger and more vibrant economy.
