The Karachi Chamber of Commerce and Industry (KCCI) has put forth a recommendation to limit the scope of super tax implementation in the upcoming budget for 2024-25.
In its proposals, the KCCI informed authorities about the implications of Section 4C of the Income Tax Ordinance, 2001, which introduced the Super Tax through the Finance Act of 2015.
The Super Tax imposes an additional financial burden on companies and high-income earners exceeding a certain income threshold, with the aim of augmenting government revenue and tackling fiscal challenges. Despite rate reductions since its inception, the tax continues to weigh heavily on entities, particularly those subject to final taxation. This has resulted in ongoing legal disputes as companies challenge the fairness of the tax. High-income individuals, taxed at the standard rate of 29%, are similarly disproportionately affected, potentially leading to practices such as income concealment.
The KCCI proposed a selective implementation of the Super Tax, targeting specific high-profit sectors rather than applying it uniformly across all companies surpassing a certain income threshold. This approach entails levying the tax on sectors with exceptional earnings or higher margins, such as banking, insurance, financial services, and energy, which often generate substantial profits without facing commensurate taxation.
Exempting the manufacturing sector from the Super Tax is deemed crucial by the KCCI, as this sector frequently reinvests profits into research and employment, thereby stimulating local output and exports. By exempting manufacturing, the tax concerns within this sector could be addressed, further promoting economic growth.
By exempting certain industries from the Super Tax and focusing primarily on high-earning sectors, the financial strain on affected entities and individuals could be alleviated. This approach would also help reduce litigation arising from tax disputes and foster a more equitable tax environment by eliminating perceived unfair fiscal burdens. Moreover, such a measure would encourage transparency in income reporting while offering much-needed relief to the business community.
The KCCI’s recommendation underscores the importance of balancing revenue generation with the need to incentivize economic growth and investment. As discussions surrounding the upcoming budget continue, stakeholders will be closely monitoring the government’s response to these proposals, with hopes for measures that promote sustainable economic development and prosperity.