Karachi, June 5, 2025 – A leading tax expert has strongly supported the implementation and expansion of the Capital Value Tax (CVT) in the upcoming federal budget 2025-26 as a strategic measure to broaden Pakistan’s tax base and improve equity in the tax system.
Ashfaq Yousuf Tola, a renowned authority on taxation and public finance, has proposed several reforms including the introduction of a Minimum Asset Tax (MAT) via the CVT framework. He believes that expanding the scope of CVT will ensure that high-net-worth individuals contribute their fair share to national revenue.
Tola’s proposal includes the application of MAT to all resident individuals whose domestic assets exceed PKR 100 million. Under this framework, a 1% tax would be levied on the fair market value of assets exceeding this threshold. Importantly, the MAT under the CVT would not be an additional tax burden but would instead be adjustable against the individual’s income tax liability, effectively serving as a minimum level of direct taxation, Business Recorder quoted Tola as saying.
According to Tola, this approach, when implemented through the CVT, would reduce tax evasion and promote compliance among asset-rich individuals who often remain outside the tax net. He emphasized that CVT-linked MAT would help bridge the gap between wealth accumulation and tax contribution.
In addition to his suggestions on CVT, Tola also called for a modernization of the definition of “Resident Individual” under Section 82 of the Income Tax Ordinance, 2001. He argued that the current criterion of 183 days of presence in Pakistan is outdated and should be revised in line with international standards.
He proposed that individuals who stay in Pakistan for 182 days or more during a financial year be classified as residents. Those present for 120 to 181 days should be considered “Resident but Not Ordinarily Resident” (RNOR) if they are Pakistani citizens or POC holders with significant income and no tax liability abroad. Anyone spending less than 120 days in the country should be treated as a non-resident regardless of income.
Tola’s recommendations, especially the strengthened role of CVT, are expected to influence policy discussions ahead of the 2025-26 budget announcement.