Karachi, May 9, 2025 – The Overseas Investors Chamber of Commerce and Industry (OICCI) has proposed a structured, three-year phase-out of the minimum turnover tax, citing its detrimental impact on businesses operating on slim profit margins.
The recommendation was submitted to the Federal Board of Revenue (FBR) as part of the OICCI’s tax proposals for the federal budget 2025–26.
The OICCI specifically raised concerns regarding Section 113 of the Income Tax Ordinance, 2001, under which the turnover tax is levied on companies regardless of their profitability. In its submission, the chamber stressed that in the current economic climate—where inflation, rupee volatility, and energy costs are squeezing margins—this tax is an undue burden on already compliant taxpayers.
“Companies are struggling to earn profits, and the tax on turnover, even in the absence of income, discourages investment and growth,” the OICCI stated. “It is especially problematic for sectors like oil marketing, refineries, electricity distribution, telecom, and cable manufacturers, which operate on wafer-thin margins but have large turnovers.”
The OICCI also pointed out that companies already subject to tax under Section 113C—which taxes them at 29% of net taxable income or accounting profits, whichever is higher—are effectively being penalized twice due to the additional burden of turnover tax.
To alleviate this pressure, the OICCI has proposed reducing the turnover tax rate to 0.25% for the fiscal year 2025–26 for capital-intensive, low-margin sectors such as refineries and oil marketing companies. It further recommends that the turnover tax be gradually phased out entirely by 2027–28. The proposed rates are:
• 2025–26: 0.25%
• 2026–27: 0.125%
• 2027–28: 0%
Additionally, the OICCI has urged the FBR to extend the period for adjusting excess minimum turnover tax from three to five years, giving businesses more room to manage tax credits and financial planning.
The proposal aims to align taxation policy with economic realities and to encourage sustainable business practices, particularly for industries that contribute significantly to employment and national revenues, despite operating under narrow profit margins.