Ahmed Khan Malik

Karachi’s industrial sector is actively advocating for comprehensive tax reforms to stimulate economic growth and enhance competitiveness.

The industries in the mega city have been facing multiple issues ranging from the infrastructure problems to rising costs of utilities and high taxes. “As the federal budget for the fiscal year 2025-26 is approaching, Karachi’s industrial sector is actively advocating for comprehensive tax reforms to stimulate economic growth and enhance competitiveness,” Mahmood Rana, Secretary of Karachi Business Forum, told WealthPK.

He said that key stakeholders, including the various associations, representing the Karachi industries, have presented a series of proposals aimed at overhauling the existing tax framework. He recommends a gradual reduction in the corporate tax rate by 1% annually until it reaches 25%, aligning with rates prevalent in other emerging economies.

“This will help alleviate the financial burden on formal sector companies, thereby fostering a more conducive environment for business operations and investments,” he said.

About the need for reforms in the Super Tax Regime, Rana said the Karachi Business Forum had suggested a progressive reduction of 2% per annum. “Additionally, the forum has proposed restructuring the super tax into progressive slabs, ensuring a more equitable tax system that reflects the varying capacities of businesses.”

He pointed out that to enhance revenue generation, the Federal Board of Revenue had initiated consultations with key stakeholders, including Karachi’s industrial representatives, to develop strategies aimed at broadening the tax base. “These discussions focus on integrating the entire value chain of all businesses into the General Sales Tax (GST) regime and phasing out the existing tax exemptions and concessions.”

Regarding the simplification of tax procedures, he pointed out that both the Karachi Business Forum and FBR had emphasised the need to simplify tax laws to facilitate ease of doing business. “The proposed measures include the removal of redundant provisions, harmonisation of tax policies across federal and provincial levels, and the establishment of a National Tax Authority to serve as a single-window assessment platform for taxpayers.

Such reforms aim to reduce administrative burdens and enhance compliance,” he said. Recognising the pivotal role of exports in economic growth, he said the forum had recommended reducing the withholding tax on exporters from 2% to 1% and rationalising the withholding tax on the services sector. “These measures are intended to bolster the competitiveness of Pakistani goods and services in international markets.”

The Karachi Business Forum secretary said the government had expressed its commitment to fiscal reforms, as outlined in the Medium-Term Budget Strategy Paper for FY2024-25 to FY2026-27. “This document emphasises the need for optimal revenue mobilisation, a broader tax base, and the correction of energy sector imbalances.

“The collaborative efforts between the government and Karachi’s industrial sector are expected to pave the way for a more equitable and growth-oriented tax system in the coming fiscal year,” Rana said. He said that as the budget formulation process progresses, the active engagement of Karachi’s industrial stakeholders underscores a collective endeavour to create a tax environment that fosters economic resilience and sustainable development.

Credit: INP-WealthPk