Summary of PBC’s Proposal on Minimum Tax for Listed Companies

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.

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