Karachi, January 28, 2025 – The Pakistan Tax Bar Association (PTBA) has presented its comprehensive tax proposals for the federal budget 2025-26, emphasizing the need for digitalization across all stages of economic activity.
PTBA’s vision centers around improving documentation, broadening the tax base, and addressing inefficiencies within the taxation system to create a more sustainable and equitable economy.
The PTBA has underscored the critical need to expand the country’s tax base, ensuring that every economic sector contributes fairly to Pakistan’s GDP. Simultaneously, it highlighted the importance of protecting genuine taxpayers from excessive tax burdens and maladministration. According to PTBA, a well-documented and digitized tax system is the only way to achieve a transparent, responsible, and sustainable economy.
Direct Tax Proposals
PTBA’s recommendations for direct taxes aim to modernize and simplify tax collection, thus encouraging compliance. The association proposed taxing all incomes to expand the taxpayer base to 50 million individuals. Other suggestions include uniform taxation for salaried individuals, introducing a 10% fixed tax on pensions exceeding PKR 100,000, and automating the issuance of exemption certificates within 15 days.
It also called for abolishing Section 7E of the Income Tax Ordinance, repealing the Capital Value Tax (CVT) on foreign assets, and ensuring fair assessments under Section 122 of the Ordinance. Furthermore, PTBA advocates taxing agricultural income under the federal government’s jurisdiction and automating the refund issuance process for greater efficiency.
Indirect Tax Proposals
For indirect taxes, PTBA suggested implementing Point of Sale (POS) systems at all levels of trading and reducing the sales tax rate to a single-digit 6% to encourage compliance. It also proposed a reduced sales tax for online transactions to promote digital payments.
Digitalization and AI in Tax Reforms
A significant part of PTBA’s proposals revolves around leveraging AI and digitalization to enhance tax collection. It recommended implementing digital invoicing to track transactions across the supply chain and using NADRA’s technological capabilities to identify taxable entities. PTBA also suggested collaborating with reputable international service providers to streamline digital tax collection.
By introducing a digitized oversight mechanism, PTBA believes the Federal Board of Revenue (FBR) can strengthen governance, minimize tax evasion, and simplify compliance. It emphasized that a digital-first approach would reduce cash-based activities and provide a robust information trail for tax authorities.
General Recommendations
PTBA has called for improved facilitation of taxpayers at all stages and urged the government to allocate tax revenues transparently to health, education, infrastructure, and transportation projects. Public-private partnerships for government hospitals and schools were also recommended to ensure better services for tax filers.
Additionally, PTBA emphasized the importance of public transparency by proposing that tax returns of government officials, politicians, and judges be made accessible under the Right to Information (RTI). It also suggested revising the salary packages of FBR officials to improve morale and efficiency.
PTBA’s proposals highlight a comprehensive roadmap for digitalizing Pakistan’s tax system and ensuring that every citizen contributes to the national exchequer while benefiting from transparent and equitable policies.