KARACHI, April 19 — Foreign investors in Pakistan have called for sweeping tax reforms, including lower corporate tax rates and the phased elimination of additional levies, as part of proposals submitted for the federal budget 2026-27.
The recommendations were presented by the Overseas Investors Chamber of Commerce and Industry during a meeting with Minister of State for Finance Bilal Azhar Kayani, as part of the government’s ongoing consultations with stakeholders ahead of the budget.
Officials from the Ministry of Finance, including representatives from the Tax Policy Office, also participated in the discussions, which focused on improving Pakistan’s investment climate and enhancing tax system efficiency.
Foreign investors proposed reducing the corporate tax rate to 28% in fiscal year 2026-27, followed by a gradual cut to 25% over the next three years. They also called for the phased abolition of the so-called super tax, arguing that the combined burden of corporate tax, super tax, and other statutory contributions significantly increases the effective tax rate.
According to the OICCI, the cumulative impact of these levies — including the Workers Welfare Fund and Workers Profit Participation Fund — pushes the effective tax rate for many companies to nearly 46%, discouraging investment and limiting business expansion.
The group also raised concerns about heavy taxation on the banking sector, warning that it could constrain credit growth and increase the cost of financing for businesses across the economy.
To improve talent retention, investors recommended scrapping the super tax and a 10% surcharge on higher-income salaried individuals, while proposing a cap of 25% on personal income tax rates.
Additional proposals included rationalising withholding taxes, reducing the general sales tax on goods from 18% to 17% initially — with a longer-term target of 15% — and reviewing minimum tax and alternate minimum tax provisions.
OICCI Secretary General M. Abdul Aleem said the proposals were aimed at creating a predictable and investment-friendly tax framework based on documentation and digitisation. He stressed the need to broaden the tax base by bringing under-taxed sectors such as agriculture, retail, real estate and services into the formal net.
Investors also flagged operational issues, including delays in tax refunds, frequent compliance notices and weak coordination between federal and provincial tax systems.
They urged policymakers to support export-oriented industries and consider flexibility within international financial programmes to maintain competitiveness.
The finance ministry said it welcomed input from foreign investors and emphasised continued engagement to support economic growth and improve transparency in the tax regime.