Karachi, June 6, 2025 – The Karachi Tax Bar Association (KTBA) has called on the federal government to lower Pakistan’s corporate tax rate, highlighting that it is currently the highest in Asia.
In its formal recommendations for the upcoming federal budget 2025–26, the KTBA emphasized the urgent need to create a more competitive and investor-friendly environment by reducing the burden on businesses.
According to KTBA, the current corporate tax rate in Pakistan stands at 29%. However, when additional levies such as the Workers Welfare Fund (WWF) and the Workers Welfare Participation Fund (WWPF) are included, the effective corporate tax rate climbs to approximately 36%. This rate, the KTBA noted, significantly exceeds the average corporate tax rates prevailing in other Asian countries.
Referring to Part I of the First Schedule of the Income Tax Ordinance, 2001, the association urged the government to initiate a phased reduction of the corporate tax rate. KTBA proposed that the rate be brought down to 25% over the next few years by reducing it by 1% annually. In addition, the association recommended that the rate of tax on small companies be lowered to 15%, also through a gradual process.
The KTBA argues that the current high tax regime not only discourages corporatization but also incentivizes tax evasion and encourages businesses to remain undocumented. It creates a significant barrier for foreign and local investors who might otherwise consider Pakistan a viable destination for economic activity. Lowering the corporate tax rate, the KTBA believes, would promote transparency, enhance tax compliance, and broaden the tax base.
Furthermore, the association stressed that a fair and regionally competitive corporate tax structure is crucial for stimulating economic growth and attracting both domestic and international capital. The proposed adjustments aim to align Pakistan’s tax system with global practices and to make it more equitable and business-friendly.
As the government prepares its budget, the KTBA’s recommendations serve as a timely reminder that fiscal policy plays a critical role in shaping investment decisions and long-term economic stability.