Committee Proposes Tax Rationalization To Boost Investment, Exports

ISLAMABAD, (UrduPoint / Pakistan Point News - 7th Aug, 2025) The Sub-committees on Tax Rationalization and Export Enhancement in its high-level meeting here on Thursday put forward a set of long-term tax rationalization proposals aimed at strengthening Pakistan’s investment climate and export potential.

According to press release issued by Ministry of Industries and Production (MoIP), the meeting was chaired by Special Assistant to the Prime Minister (SAPM) MoIP, Haroon Akhtar Khan and was attended by Prime Minister’s Coordinator, Rana Ehsan Afzal, representatives of the Federal board of Revenue (FBR), and other key stakeholders from the industrial and economic sectors.

It recommended for providing investors with a clear and predictable roadmap through a reformed industrial policy and also suggested gradually reducing the corporate income tax rate from the current 29% to 26% over the next three years.

Highlighting regional competitiveness, Haroon Akhtar Khan noted that corporate tax in Pakistan remains significantly higher than countries like Vietnam, where it is capped at 17%. He emphasized that lowering the tax burden would enhance overall business performance and economic activity.

The committee also recommended to rationalize the super tax regime, adding that super tax be applied only on additional income rather than total profits. It further suggested that this tax be reduced to 5% over five years, with a provision for complete elimination in the sixth year if the country achieves a positive Primary fiscal balance.

These measures are expected to incentivize reinvestment and support business expansion.

To encourage exports, the sub-committees proposed the introduction of a new Drawback of Local Taxes and Levies (DLTL) scheme and the timely payment of sales tax and income tax refunds.

Haroon Akhtar Khan underlined the importance of fast-tracking refunds and endorsed a proposal to ensure sales tax refunds are disbursed within 72 hours through a dedicated monitoring mechanism. Additional recommendations included ending cross-subsidies in industrial power tariffs and removing advance taxes on exporters.

The meeting also discussed financial facilitation for exporters and proposals were made to simplify banking procedures and to offer export financing at interest rates 500 basis points lower than the prevailing policy rate. These reforms aim to ease the financial burden on exporters and improve their competitiveness in international markets.

The SAPM reaffirmed the government’s commitment to increasing exports as a national priority.

He conveyed Prime Minister Shehbaz Sharif’s clear instructions to prioritize export growth and noted that Pakistani exporters currently face challenges such as high interest rates, costly utilities, and a heavy tax burden.

He emphasized that providing targeted incentives and policy support to industrialists can enable them to compete effectively in global markets and contribute to sustainable economic growth.