Islamabad, August 7, 2025 – In a significant development aimed at reviving Pakistan’s industrial sector, the industry revival committee has proposed a phased reduction in the corporate income tax rate—from the current 29% to 26%—over the next three years.
The recommendation came during a high-level meeting of the sub-committees on tax rationalization and export enhancement, convened under the framework of Pakistan’s emerging industrial policy.
The meeting, held in Islamabad, was chaired by Special Assistant to the Prime Minister (SAPM) on Industries and Production, Mr. Haroon Akhtar Khan. It was attended by Prime Minister’s Coordinator Mr. Rana Ehsan Afzal, representatives from the Federal Board of Revenue (FBR), and leading stakeholders from the business and industry sectors.
The committee emphasized that Pakistan’s corporate tax rate remains uncompetitive compared to regional economies. Mr. Haroon Akhtar Khan highlighted that countries like Vietnam offer significantly lower rates—capped at just 17%—which gives their industries a competitive edge. He argued that a reduced and predictable tax regime would not only attract greater investment but also foster industrial growth and economic diversification.
In addition to corporate tax reforms, the committees proposed rationalizing the super tax structure. They recommended that super tax be levied only on additional income rather than total profits and be gradually reduced to 5% within five years. Furthermore, they suggested its complete elimination by the sixth year, contingent on Pakistan achieving a positive primary fiscal balance. These proposals aim to encourage reinvestment and reduce the cost of doing business for domestic industries.
Export facilitation was also a key focus of the discussions. The sub-committees proposed revamping the Drawback of Local Taxes and Levies (DLTL) scheme to support exporters, along with ensuring the timely disbursement of income and sales tax refunds. SAPM Haroon Akhtar Khan backed the proposal for a 72-hour refund mechanism, overseen by a dedicated monitoring system.
Additional recommendations included eliminating cross-subsidies in power tariffs for industrial users, removing advance income taxes on exporters, and introducing simplified banking processes for export-related transactions. The committee also proposed offering export financing at interest rates 500 basis points lower than the prevailing policy rate, a move that could ease financial constraints on businesses looking to expand their presence in international markets.
Reaffirming the government’s commitment, Mr. Khan conveyed Prime Minister Shehbaz Sharif’s clear directive to prioritize export growth and industry revival as national economic goals. He stressed that addressing the current challenges—such as high utility costs, interest rates, and tax burdens—through targeted reforms and incentives would enable the industry to compete globally and contribute meaningfully to Pakistan’s economic stability.