Corporate Tax Reduction Proposed

Sub body on Industrial Policy backs refunds within 72 hours

Staff Report

Islamabad: Industrial Policy Committees has proposed a corporate tax cut and backed a proposal to issue sales tax refunds within 72 hours.

The sub committee has stressed the need for prompt processing of refunds and backed a proposal to issue sales tax refunds within 72 hours via a dedicated monitoring system.

A key recommendation was the gradual reduction of the corporate income tax rate from 29% to 26% over the next three years. A high-level meeting of the sub-committees on tax rationalization and export enhancement, held under Pakistan’s Industrial Policy framework, took place in Islamabad today.

The meeting was chaired by the Special Assistant to the Prime Minister (SAPM) on Industries and Production, Mr. Haroon Akhtar Khan, and attended by the Prime Minister’s Coordinator, Mr. Rana Ehsan Afzal, representatives from the Federal Board of Revenue (FBR), and other key stakeholders from the industrial and economic sectors.

The committees proposed a range of long-term reforms aimed at encouraging investment and enhancing export competitiveness. A key recommendation was the gradual reduction of the corporate income tax rate from 29% to 26% over the next three years. Highlighting regional comparisons, Mr. Haroon Akhtar Khan noted that Pakistan’s corporate tax remains significantly higher than countries like Vietnam, where it is capped at 17%.

He emphasized that a lower tax burden would improve business performance and drive economic growth.Another major proposal was to rationalize the super tax regime.

The committees recommended applying the super tax only on additional income rather than total profits. They further suggested reducing the super tax to 5% over five years, with a possibility of complete elimination in the sixth year—conditional upon achieving a positive primary fiscal balance.

These measures aim to incentivize reinvestment and encourage business expansion.To strengthen exports, the sub-committees proposed introducing a new Drawback of Local Taxes and Levies (DLTL) scheme and ensuring timely disbursement of sales tax and income tax refunds. SAPM Haroon Akhtar Khan stressed the need for prompt processing of refunds and backed a proposal to issue sales tax refunds within 72 hours via a dedicated monitoring system.

Additional recommendations included removing cross-subsidies in industrial power tariffs and eliminating advance taxes on exporters.

The meeting also reviewed steps for financial facilitation of exporters. Key suggestions included simplifying banking procedures and offering export financing at interest rates 500 basis points lower than the prevailing policy rate. These initiatives aim to ease the financial burden on exporters and enhance their global competitiveness.

Addressing the participants, SAPM Haroon Akhtar Khan reaffirmed the government’s commitment to prioritizing exports as a national imperative. He conveyed Prime Minister Shehbaz Sharif’s directive to place export-led growth at the center of Pakistan’s economic strategy. Mr. Khan acknowledged that exporters face high interest rates, expensive utilities, and a heavy tax load.

He stressed that with targeted incentives and strong policy support, Pakistani industrialists can become globally competitive and contribute to sustainable economic progress.