Pakistan Business Council Voices Budget Concerns: FBR Urged to Reconsider Key Tax Measures

Pakistan Business Council Voices Budget Concerns: FBR Urged to Reconsider Key Tax Measures

The Pakistan Business Council (PBC) has formally urged the Federal Board of Revenue (FBR) to review key tax policies impacting listed companies and exporters. In a letter addressed to Dr. Najeeb Ahmad, Member Policy at FBR, the PBC emphasized the need for reforms in the upcoming federal budget to support economic formalization, enhance exports, and promote investment.

Following earlier meetings with the Finance Minister, the FBR Chairman, and policy teams, the PBC reiterated its call to eliminate tax on bonus shares, gradually reduce corporate tax rates for listed companies, and alleviate the burden of minimum and advance taxes on exporters.

Data shared with the FBR highlighted a sharp decline in bonus share declarations—from 49 in FY2021 to just 7 in FY2024—after the introduction of tax on such issuances. The PBC argued that taxing bonus shares, which do not alter the intrinsic value of shareholding, is economically unjustified and discourages reinvestment.

On corporate taxation, the PBC estimated that a 1% reduction in the tax rate for listed companies would have a fiscal impact of Rs. 29.4 billion, based on FY2024 earnings data from the Pakistan Stock Exchange (PSX). The Council has recommended reducing the rate gradually to 25%, bringing it in line with regional benchmarks and encouraging formal sector participation.

The PBC also highlighted the adverse impact of turnover-based minimum tax and advance tax on exporters. Analysis of 34 listed composite textile companies showed that for 24 companies, the minimum tax exceeded their actual liability under the normal tax regime, resulting in projected annual overpayment of Rs. 3.9 billion. Additionally, advance tax on export proceeds led to excess tax payments of Rs. 3.54 billion for the March 2025 quarter alone — funds that remain locked and delay much-needed cash flow for exporters.

The PBC urged the FBR to abolish tax on bonus shares, implement a phased reduction in corporate tax, and rationalize minimum and advance taxes on export receipts. The Council stressed that these measures are essential for sustaining export competitiveness and supporting Pakistan’s broader economic goals.