Prime Minister Shehbaz Sharif has directed officials to examine whether high income and sales tax rates can be reduced to stop companies and skilled workers from leaving Pakistan.
The move comes despite heavy taxation already in place and a revenue shortfall of Rs. 276 billion in the first four months of the fiscal year.
A report by Express Tribune says a proposal under review aims to inject about Rs. 1.1 trillion into the economy by lowering the burden on businesses and households.
The plan includes reducing the top income tax rate on individuals from 45 percent to 25 percent, corporate tax from 29 percent to 25 percent, ending the 10 percent super tax, cutting sales tax from 18 percent to 15 percent, and removing intercorporate dividend tax.
Officials argue that excessive taxes are pushing companies out of Pakistan and driving professionals abroad.
n many cases, businesses pay close to 60 percent of their net income in different taxes and are still pressured to pay advance tax to help achieve targets.
The salaried class has been hit hardest. Withholding tax from salaries jumped 55 percent last year to Rs. 605.6 billion after slabs were reduced and rates increased. This made salaries the second largest source of withholding tax after contracts.
The International Monetary Fund is expected to oppose any sharp tax cuts during the loan programme. Officials say the plan may only move forward once the bailout ends, although the IMF has also expressed concern about multinational companies exiting Pakistan.
Revenue collection remains under strain, with the FBR collecting Rs. 3.83 trillion in July to October against a target of Rs. 4.1 trillion. Income tax and sales tax both missed their targets, while customs duty slightly exceeded expectations due to higher imports.
The IMF has already cut the annual tax goal by Rs. 197 billion, and the government may take additional revenue measures in January if needed.
Tax return filings have reached 5.9 million so far this year, up 17.6 percent from the same period last year, though still below the 7.8 million total filers recorded previously. The government has ruled out a blanket filing extension, directing only genuine hardship cases to seek relief.
The Prime Minister has set up a working group to examine customs tariffs, trade issues, and dumping concerns with input from business leaders.
