Karachi, February 20, 2025 – The Pakistan Business Council (PBC) has urged the Federal Board of Revenue (FBR) to gradually eliminate the minimum turnover tax in the federal budget for the fiscal year 2025-26.
The PBC believes that businesses should be taxed on their actual profits rather than their turnover or assets, ensuring a fair and growth-friendly taxation system.
In its detailed tax proposals for the upcoming budget, the PBC highlighted the undue reliance on turnover-based taxation. The PBC turnover concern stems from the fact that such a tax penalizes businesses regardless of their profitability, making it particularly challenging for enterprises operating on thin margins. The organization emphasized that taxing turnover instead of net income discourages investment, hampers business expansion, and leads to inefficiencies in resource allocation.
The PBC further pointed to the recent failure of the Advance to Deposit Ratio (ADR) tax imposed on banks, noting that policies based on balance sheet figures rather than profitability have not yielded the desired results. The PBC turnover-based tax critique extends to multiple industries, stressing that such measures create distortions in the business environment and hinder economic growth.
Another major concern raised by the PBC is the double taxation of declared overseas assets. The imposition of Capital Value Tax (CVT) on both declared foreign assets and the income generated from them is prompting many Pakistanis to relocate abroad, with some even renouncing their Pakistani nationality. The PBC turnover-focused recommendations call for a shift in taxation policies to prevent capital flight and retain investor confidence.
To begin the transition, the PBC proposed that listed companies should be the first to be exempted from the minimum turnover tax. Over time, this phase-out should extend to all businesses, ensuring that taxation is based on actual income rather than revenue figures. The PBC turnover perspective aligns with global best practices, where corporate taxation is primarily focused on profitability rather than turnover.
The PBC firmly advocates that future taxation policies should not be linked to the balance sheets of banks or corporate entities. Instead, tax authorities should focus on taxing income rather than the declared overseas assets of Pakistani tax residents. By doing so, the government can create a more sustainable and equitable taxation framework, fostering economic stability and business growth in the country.