KARACHI, April 20, 2026 — The Overseas Investors Chambers of Commerce and Industry (OICCI) has recommended that Pakistan cap withholding tax rates at a maximum of 5%, arguing that such taxes should be used primarily to broaden the tax base rather than generate direct revenue.
In a detailed reform proposal, OICCI, the representative body of foreign investors and multinational companies in Pakistan, said tax policy should be closely aligned with broader economic activity and developed in coordination with federal ministries and provincial governments. It warned that fragmented policymaking in isolation would limit effectiveness and hinder long-term fiscal stability.
“The central objective must be to raise the tax-to-GDP ratio on an equitable basis from around 10–12 percent to above 15 percent over the medium term,” the report said, adding that Pakistan’s fiscal strength depends on shifting away from heavy reliance on withholding and minimum taxes.
The chamber urged a structural shift toward return-based direct taxation and a modern value-added tax system, alongside simplified compliance procedures, faster refunds, reduced discretionary changes and increased digitalisation of tax processes.
It cautioned that combining high tax rates, complex compliance systems and aggressive withholding mechanisms could increase incentives for tax evasion.
OICCI recommended that withholding taxes be restricted to documentation purposes only, while core revenue generation should rely on transparent income-based taxation.
The proposal also called for elimination of super tax provisions, reduction in corporate tax rates to 28% with a roadmap toward 25%, and a gradual reduction of sales tax to 12%. It further suggested limiting minimum taxation to select sectors and reducing salary tax slabs to a maximum of 25%.
In its phased roadmap, the OICCI proposed immediate institutional reforms, including operationalising a Tax Policy Office, freezing new tax exemptions, clearing pending refunds, and eliminating distortive taxation measures.
It also called for broader base expansion through digital invoicing, stronger federal-provincial coordination, and enforcement against large-scale tax evasion.
Over the medium term, the chamber recommended integrating a unified VAT/GST system, expanding property and agricultural taxation, and reducing reliance on distortionary levies.
In the final phase, it suggested eliminating the filer–non-filer distinction, modernising dispute resolution systems, and reforming customs to improve trade competitiveness.
OICCI said Pakistan’s tax system should ultimately evolve into a simplified, digitally integrated, and growth-oriented structure with fewer exemptions, lower rates, and stronger compliance supported by automation and data sharing across institutions.