PBC says CVT on foreign assets is pushing wealthy Pakistanis to renounce nationality and recommends sweeping tax reforms for Budget 2026–27
The Pakistan Business Council (PBC) has said that Capital Value Tax (CVT) on foreign assets is pushing wealthy Pakistanis to surrender their nationality, warning that the tax regime is undermining investment confidence and encouraging capital flight.
In its proposals for the federal budget 2026–27, the business advocacy body said CVT—introduced through the Finance Act 2022—is being levied on declared foreign assets in addition to income tax already paid, creating an excessive combined burden.
The council argued that when CVT and income tax are applied together, the effective taxation on modest returns can become disproportionately high. It cited an example where a $100 deposit earning 4% interest could face a total tax burden of around 60% of income.
“The tax is contested in the Supreme Court and is causing wealthy Pakistanis to surrender passports,” the PBC said in its recommendations, adding that the measure is distorting residency decisions and weakening Pakistan’s investment image.
The PBC urged the government to abolish CVT on declared foreign assets. If retained, it proposed reducing the rate to 0.25% of actual cost with full credit allowed against income tax. It also recommended restoring tax residency rules to their pre-Finance Act 2022 framework.
The council said such reforms would reduce incentives for relocation abroad, help retain national wealth, and improve Pakistan’s attractiveness for foreign direct investment.
Beyond CVT, the PBC outlined a broad reform agenda for Budget 2026–27, calling for structural changes across corporate taxation, compliance, and investment policy.
It recommended phasing out the super tax or setting a clear sunset timeline, and gradually reducing the corporate tax rate from 29% to 25% over three years, beginning with listed companies.
For compliance, it proposed significantly higher withholding taxes on non-filers to strengthen enforcement, while also calling for relief measures such as the removal of advance tax on export proceeds and correction of Export Facilitation Scheme distortions.
On capital gains, the council suggested eliminating tax on the sale of shares in unlisted companies after a six-year holding period, while also advocating the abolition or reduction of minimum tax requirements and extending loss carry-forward periods.
Other recommendations included mandating electronic data interchange for imports under free trade agreements, publishing customs valuation data to curb under-invoicing, restoring group taxation benefits, and easing restrictions on corporate loss adjustments.
The PBC also called for abolishing CVT entirely or reducing it sharply with full income tax credit, removing the 9% surcharge on salaried income, and restoring higher income thresholds.
It further proposed faster tax refunds within 60 days, simplifying exemption procedures, abolishing Section 8B for listed and loss-making firms, and aligning real estate valuations with market rates.
