Karachi, February 15, 2025 – The Institute of Cost and Management Accountants (ICMA) Pakistan has submitted a comprehensive set of proposals to the Federal Board of Revenue (FBR), aiming to optimize revenue generation and support sustainable economic growth.
The Research and Publications (R&P) Committee of ICMA Pakistan, led by Muhammad Yasin, Vice President of ICMA, has meticulously prepared these recommendations. The proposals focus on broadening the tax base, integrating the entire business value chain into the General Sales Tax (GST) regime, promoting progressive taxation, and addressing distortions within the tax system alongside procedural inefficiencies.
Key Proposals for Revenue Optimization
To reduce dependence on external borrowing and enhance domestic revenue collection, ICMA has proposed several critical reforms. Among the most notable suggestions is the introduction of a Green Tax Reform to incentivize investments in renewable energy and digitalization. The reform includes tax deductions such as 50% on renewable energy projects, 30% for green energy operational costs, 40% for investments in digital infrastructure like cloud computing, and 25% for workforce training in digital skills.
Additionally, the proposals advocate for a phased taxation framework for electric vehicle (EV) manufacturers, initially applying a 10%–15% tax on profits, which would gradually increase to 20%–25% over five years to support the industry’s growth.
Expanding the Tax Base
In alignment with OECD/G20 BEPS Pillar Two, ICMA suggests implementing a 15% minimum corporate tax on multinational corporations with annual revenues exceeding PKR 21 billion. To promote equity, the institute proposes a 10% tax on pension incomes above PKR 200,000 per month, while safeguarding lower-income retirees with exemptions.
Furthermore, ICMA recommends capping the tax exclusion for employer-provided health insurance benefits at PKR 500,000 annually, with amounts above this limit taxed as ordinary income.
GST Integration and E-commerce Taxation
ICMA proposes bringing businesses with annual sales between PKR 6 million and PKR 40 million into the GST regime, applying a 1% flat tax on sales. The plan also includes a flat-rate credit scheme for non-GST-registered sellers, collecting GST at 15% with 8.5% credited for input costs and 6.5% remitted to the FBR.
For cross-border e-commerce, ICMA suggests mandatory GST registration for foreign sellers with annual sales exceeding PKR 9 million. This measure is designed to level the playing field between domestic and international digital marketplaces.
Progressive Taxation for Wealthier Segments
To address wealth concentration, ICMA recommends integrating exporters into the regular tax system and streamlining Personal Income Tax (PIT) brackets into five simplified slabs. The maximum tax rate would be 45% for non-salaried individuals, while the wealthiest 0.5% of households would face a wealth tax ranging from 1.7% to 3.5%, similar to Spain’s model.
A real estate wealth tax on property assets exceeding PKR 50 million is also proposed, with rates set between 0.5% and 1.5%. In addition, ICMA suggests a 3.5% Public Broadcasting Contribution Tax on social media earnings surpassing PKR 5 million annually and taxing digital subscriptions for platforms like Netflix and Disney+.
Correcting Distortions and Enhancing Compliance
ICMA has emphasized the need for a Compliance Risk Management (CRM) framework in major cities, leveraging third-party data analytics to bolster tax compliance. The institute also advocates for establishing a Tax Planning Unit (TPU) within the Ministry of Finance, staffed with cost and management accountants to develop and implement data-driven tax strategies.
To streamline processes, ICMA recommends modernizing the Tajir Dost Portal by automating calculations, integrating pre-filled tax returns, and adding secure payment gateways. Additionally, Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) processes would benefit from AI-driven monitoring systems.
For e-commerce transactions, ICMA proposes extending VAT/GST to cross-border online sales to prevent tax evasion and ensure equitable competition between domestic and international sellers.
These reforms collectively aim to establish a fairer, more transparent, and efficient taxation system. ICMA Pakistan remains hopeful that the FBR will give due consideration to these comprehensive recommendations, paving the way for stronger economic growth and fiscal stability.