Foreign investors today urged the government to expand Pakistan’s tax base rather than intensify the fiscal load on existing contributors, citing an effective corporate tax rate that approaches 46 percent for businesses. This key recommendation was presented by the Overseas Investors Chamber of Commerce and Industry (OICCI) to Minister of State for Finance and Revenue Bilal Azhar Kayani during consultations for the Federal Budget 2026-27.
The engagement, which also saw virtual participation from Dr. Najeeb Memon, Director General of the Tax Policy Office (TPO), formed a crucial part of the Ministry of Finance”s ongoing budget formulation process. Mr. Kayani welcomed the input from foreign investors, underscoring the importance of sustained stakeholder dialogue to foster economic growth, broaden the tax base, and enhance fiscal transparency.
The Chamber proposed a reduction in the corporate tax rate to 28 percent for FY2026-27, with a further phased decrease to 25 percent over three years, alongside the gradual abolition of the Super Tax. The OICCI highlighted that the cumulative impact of Corporate Tax, Super Tax, Workers Welfare Fund, and Workers Profit Participation Fund elevates the effective tax rate to nearly 46 percent.
Moreover, the overseas investors” body emphasised that disproportionately high taxation on the banking sector could impede economic expansion. Such levies, they noted, affect banks” capacity to efficiently deploy capital, subsequently impacting the availability and cost of working capital for enterprises across the economy.
To aid talent retention, the OICCI recommended abolishing the super tax and the 10 percent surcharge on higher-income salaried brackets, suggesting a cap on the maximum personal income tax rate at 25 percent.
Further proposals included rationalising withholding taxes, lowering the sales tax on goods from 18 percent to 17 percent with a trajectory towards 15 percent, and a thorough review of minimum and alternate minimum tax provisions.
OICCI Secretary General M. Abdul Aleem stated that these proposals are designed to establish a fair, predictable, and investment-friendly tax system, anchored in documentation and digitisation. He reiterated the necessity of expanding the tax net rather than augmenting the burden on current taxpayers, advocating for all economic segments, including agriculture, retail, wholesale, real estate, and services, to contribute proportionately to their economic share.
During the meeting, foreign investors also voiced operational concerns, such as delays in tax refunds, the issuance of excessive compliance notices despite robust financial records, and inadequate coordination between federal and provincial systems.
The OICCI further underscored the significance of bolstering export-led industrial sectors as a cornerstone for medium-term growth. They suggested that targeted policy support and, where necessary, appropriate flexibility within IMF programme frameworks should be considered to sustain national competitiveness.
The Chamber expressed optimism that these advocated measures would lead to a predictable and balanced tax regime, reinforce compliance, encourage investment, and support Pakistan”s journey towards sustainable, export-led economic advancement.