The Pakistan Business Council (PBC) has expressed its dissatisfaction with the imposition of super tax on corporate profits, describing it as a penalty on the documented sector.
In its proposals for the upcoming budget of 2023-2024, the PBC submitted recommendations to the Federal Board of Revenue (FBR), highlighting the adverse effects of the retrospective imposition of the super tax through the Finance Act of 2022.
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According to the PBC, the super tax places an undue burden on the well-organized documented sector, which plays a significant role in job creation, income generation, and the generation of substantial tax revenues for the country. The council argues that this tax measure is counterproductive and detrimental to the growth of the documented sector.
One of the key concerns raised by the PBC is the non-progressive nature of the super tax under Section 4C of the Income Tax Ordinance, 2001. The tax is applied to the entire profit once a certain threshold is crossed, disregarding the concept of marginal tax rates and the progressive basis for calculating tax liabilities. This approach contradicts the principle of fairness and discourages investment and expansion within the business community.
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To address these issues, the PBC has recommended that specific timelines should be established for the applicability of the super tax. The council argues that the mere imposition of super tax without a defined timeline is essentially an increase in the corporate tax rate, which currently stands at 29%. This lack of clarity and indefinite duration poses significant challenges to businesses, particularly considering recent economic factors such as the depreciation of the Pakistani Rupee, import constraints, and rising interest costs.
The PBC emphasizes that, without prejudice to its previous recommendations, the super tax should be applied on a progressive basis, taking into account the income level of corporations. By implementing a progressive tax system, the burden of taxation would be more equitable and aligned with the principles of economic fairness and growth.
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The PBC’s proposals aim to ensure that businesses operating within the documented sector can continue to thrive and contribute to Pakistan’s economic development. The council emphasizes the importance of a supportive business environment that encourages investment, job creation, and sustainable growth.
As the budget for the fiscal year 2023-2024 takes shape, it remains to be seen how the government and the FBR will address the concerns raised by the Pakistan Business Council regarding the super tax. The decisions made in this regard will have a significant impact on the future trajectory of the documented sector and the overall business landscape of Pakistan.
