ISLAMABAD: Pakistan Business Council (PBC) has proposed the Federal Board of Revenue (FBR) to rationalise ‘super tax’ on well-organised documented sectors in coming budget (2024-25).

Last year, the Overseas Investors Chamber of Commerce and Industry (OICCI) had asked the government to abolish super tax.

According to the budget proposals of PBC for 2024-25, super tax was imposed on the documented sector retrospectively through the Finance Act, 2022. This is a penalty on the well-organised documented sector that creates jobs and disposable incomes for millions and also generates substantial tax revenues for the country.

Moreover, under Section 4C, super tax is not progressive in nature and is applied on the entire profit once a threshold is crossed. This is contrary to the concept of marginal tax rates under the progressive basis of computing tax liabilities.

Timelines should be specified for the applicability of super tax. Mere levy of super tax without any specific timeline is simply an increase in the corporate tax rates from the current 29 percent.

The super tax should be applied on progressive tax basis instead of application of a certain percentage(%) on the entire income.

Moreover, in order to encourage reinvestment or profits super tax should be eliminated for all industries or at least for industries engaged in exports and import substitution.

Effective tax rate in the hands of an individual shareholder in case of a single holding company is nearly 68.0% which is extremely high and discourages reinvestment.

Moreover, super tax is not applicable in countries such as Bangladesh, India, Vietnam, Egypt etc, PBC added.

Copyright Business Recorder, 2024