KARACHI: President of the Pakistan Business Forum (PBF), Khawaja Mahboob Rahman, has submitted budget proposals for 2025-26 to the Ministry of Finance.
The PBF’s proposals for the Federal Budget 2025–26 are divided into the following sections: Broadening the Tax Base & Providing a Level Playing Field for Domestic Manufacturing, Promoting Industrialization / Agriculture / Growth / Job Creation, Consolidation of Businesses for Scale to Improve Competitiveness, Reducing the Cost of Doing Business in Pakistan, SME Growth, Introduced Fixed Tax on Traders, Allocation of the funds for the Development of Southern Balochistan.
According to the details, the PBF has proposed a reduction in the advance tax slabs for filers. Additionally, there is currently an 18% tax on domestic cotton, unlike imported cotton. The Forum recommends that the 18% sales tax on domestic cotton be immediately abolished in the budget.
In the budget proposals, to attract investment, the PBF suggested a 7 year tax exemption for mining mineral sectors under SIFC and lease companies involved in the Green Pakistan Initiative. For industry promotion, they proposed reducing the minimum tax to 0.25% annually.
They also recommended providing facilities for the construction sector in the budget to stimulate economic growth. In this regard, they proposed the cancellation of Section 7E in the Income Tax Ordinance and reducing the withholding tax to 1% for first-time homebuyers.
Furthermore, they suggested an amendment to Section 8B to allow the manufacturing sector to engage in exports. The PBF also demanded that the income tax rate for companies be set at 25% annually, and they recommended reviewing the super tax in the budget.
To provide more convenience to taxpayers, they proposed amendments to Section 10, Rule 34. The Forum recommended implementing a fixed tax on traders to increase the tax base, suggesting a tax of Rs20,000 per month for large traders and Rs10,000 per month for small traders.
They also proposed allocating funds in the budget for the development of districts in southern Balochistan. According to the document, the PBF recommended the federal government allocate funds for the development of these areas.
In November 2020, the Imran Khan government allocated Rs540 billion for the southern districts, and the remaining 50% of this amount should be released in the budget.
Additionally, they recommended that income tax and sales tax audits be conducted once every four years and suggested an amendment to SRO 250-2019 to promote business activities.
The Forum also proposed a reduction in corporate tax rates to align with the private sector in neighbouring countries and the removal of the tax exemptions granted to industries in FATA and PATA from the budget.
In the budget proposals it’s further stated the import of all commodities seeds is not restricted while cotton seeds are banned. Hybrid Cotton Seed should be open for import as PM announced in his inauguration speech.
The proposal further stated taxes should be simple, predictable and supportive of business growth and formalization of the economy. The aim should be for higher tax revenues to flow from the combination of improved profitability of existing taxpayers and from a broadening of the tax base.
Wealth creation through fair means should be encouraged, not penalized. Industry, which presently contributes taxes disproportionate to its share of GDP must be facilitated to create more jobs, boost value-added exports and promote sensible import substitution. The impact of taxes on manufacturing vs commercial importers should be reviewed, as should the impact on corporates vis-à-vis other forms of business.
PBF calls for the most favourable fiscal regime to apply to limited companies who falls in companies act. Similarly, provinces have little incentive to check smuggling as customs duty and GST evaded are federal taxes and do not directly hurt their revenues. Provinces may be incentivized to facilitate raids on shops that deal in smuggled goods
President Khawaja Mehboob urged Rehman said PBF’s recommendations for Budget 2025– 26 have been prepared in the backdrop of Pakistan’s economy facing a major crisis, import curbs which were put in place to manage the current account deficit have severely impacted the manufacturing sector.
High energy rates and weaker currency which is at the highest level in the last 50 years, have led to closure of many manufacturing units and unemployment. As a result, large sections of the population are finding it hard to make ends meet.
Whilst at the current economic environment as an opportunity to bring about the major structural changes that the economy needs. These include increasing the tax base, reducing government expenditures and ensuring that general subsidies currently being offered are targeted towards those who need them the most.
This year’s tax proposals look to save jobs in the manufacturing & formal services sectors and to lay the groundwork for a sustained economic recovery driven not by imports but by exports and domestic manufacturing with strong and roubst agriculture.
Copyright Business Recorder, 2025
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