Karachi, May 26, 2025 – The Institute of Chartered Accountants of Pakistan (ICAP) has put forward a significant reform proposal in its recommendations for the Federal Budget 2025-26.
ICAP has urged the government to replace the current withholding tax regime for listed companies with a more streamlined and efficient adjustable advance tax regime.
According to ICAP, the corporate sector—particularly listed companies—comprises highly compliant taxpayers who contribute significantly to national tax revenues. Despite their compliance, these companies are subjected to a complex and expanding withholding tax system. ICAP emphasized that many companies are facing increasing difficulties in obtaining tax credits due to several issues, such as the non-availability of Computerized Payment Receipts (CPRs), late or non-deposit of taxes by withholding agents, or mismatches in the Federal Board of Revenue’s (FBR) electronic database.
In this context, ICAP has proposed that the FBR consider eliminating the burden of the withholding tax regime for listed entities and replacing it with a monthly advance tax payment mechanism. Specifically, ICAP has recommended an amendment to Section 147 of the Income Tax Ordinance, 2001, to require listed companies to pay advance tax on a monthly basis rather than quarterly.
ICAP believes that such a move would simplify the taxation process, making it more efficient for both taxpayers and the tax authorities. The monthly advance tax payment system would ensure timely revenue collection by the FBR, directly from the companies, without relying on third-party withholding agents. This would also help in reducing tax fraud risks, eliminate unnecessary documentation, and improve transparency.
Furthermore, ICAP highlighted that this change would positively impact the cash flow management of listed companies by reducing the incidence of excessive withholding and the associated delays in tax refunds. It would also ease administrative burdens and help create a more business-friendly tax environment.
By proposing this reform, ICAP continues to advocate for a more progressive and facilitative tax policy for Pakistan’s corporate sector, aligning compliance incentives with operational ease.