Category: Taxation

Karachi, April 17, 2025 — The Karachi Chamber of Commerce and Industry (KCCI) has called on the government to exempt foreign exchange-earning businesses from provincial taxation, aiming to promote economic stability and protect vital inflows into Pakistan’s economy.

In its comprehensive tax proposals for the 2025–26 budget, the KCCI highlighted a critical concern: businesses that generate foreign exchange—such as Indenting Agents, Buying Houses, and similar service-oriented operations—are already subject to federal taxation. Since foreign exchange earnings directly influence Pakistan’s national reserves and macroeconomic policies, they are traditionally governed by federal laws. However, KCCI emphasized that some provincial authorities have also started imposing taxes on the same income, creating jurisdictional overlaps and undermining the principle of unified taxation.

The KCCI warned that this dual taxation structure discourages businesses from bringing their foreign exchange earnings into the country. “Over-taxation increases the operational burden and disincentivizes the repatriation of valuable foreign exchange into Pakistan, thereby weakening our external account position,” stated a KCCI spokesperson.

Moreover, the KCCI pointed out that high tax liabilities at both federal and provincial levels reduce business competitiveness, especially when compared to regional players operating under more favorable regimes. Businesses may opt to park their foreign exchange earnings offshore, reducing liquidity in the domestic market and putting further pressure on Pakistan’s already strained foreign exchange reserves.

To address these challenges, the KCCI has proposed a targeted exemption from provincial taxes for businesses that earn and remit foreign exchange into Pakistan. The Chamber stressed that such a measure would reduce tax overlap, enhance the ease of doing business, and encourage compliance.

“The objective is to build a transparent and business-friendly framework that encourages entrepreneurs to keep their foreign exchange earnings within Pakistan,” the KCCI noted. “This will not only support a stable exchange rate but also help boost investor confidence.”

By aligning tax policies with national economic goals, the KCCI believes the government can create a more predictable and growth-oriented environment for foreign exchange-generating enterprises.