KARACHI: It has been suggested to the Federal Board of Revenue (FBR) to reduce the corporate tax rate to 25% from the current 29% in order to attract local and foreign investment.
The Karachi Tax Bar Association (KTBA), in its proposals for the 2022/2023 budget, suggested the FBR to reduce the corporate tax rate by amending Part 1, First Schedule of the Tax Ordinance 2001 on income.
READ MORE: Proposed tax incentives for making new investments
The tax bar said that currently the corporate tax rate in Pakistan is 29% and it is increasing due to Workers Welfare Fund (WWF) and Workers Profit Sharing Fund (WPPF). ) up to 36%, which is higher than the average tax rate. in Asia or 21.32 percent. The higher corporate tax rate in Pakistan has increased the cost of doing business and the uncompetitive position regionally.
READ MORE: Extension of the Job Creation Tax Credit
The KTBA proposed: “The corporate tax rate should be reduced to 25% by gradually decreasing by 1% every year. This proposal was previously available under the Ordinance which was removed by the 2019 Finance Law.”
In addition, the tax bar has also suggested that the small business tax rate should also be gradually reduced to 15%. In addition, WPPF earnings should be tax exempt.
READ MORE: Proposed Reintroduction of Named Sales Tax Credit
Giving justification, the KTBA said that the high tax rate encourages tax evasion and discourages documentation of economy and corporatization. “This discourages foreign and local investment,” he added.
The KTBA also suggested to the FBR to allow a tax credit for making new investments by amending Sections 65B, 65D and 65E of the Income Tax Order 2001. The tax bar said sections 65B, 65D and 65E are related to the newly created investment tax credit. industrial company and industrial company created before July 01, 2011.
READ MORE: Change Requested in Greenfield Industry Incentive
“These are not currently available to ratepayers for new investment,” he said. It therefore does not encourage new investments.
“Tax credits may be granted for making investments in new/existing industrial enterprises, such as the tax credit under Section 65B of the Ordinance which may be reinstated. Simultaneously, U/ss 65D and 65E deadlines can be further extended until June 30, 2025,” the tax bar said, adding that it will promote industrialization and new investment in the country.