Prime Minister Shehbaz Sharif has directed officials to explore whether reducing high income and sales tax rates could help stop companies and skilled workers from leaving Pakistan. The move aims to boost economic confidence and slow the trend of business relocation abroad.
According to a report by The Express Tribune, the government is reviewing a proposal that could inject nearly Rs. 1.1 trillion into the economy. The plan includes reducing the top income tax rate for individuals from 45 percent to 25 percent and corporate tax from 29 percent to 25 percent. It also suggests eliminating the 10 percent super tax and cutting sales tax from 18 percent to 15 percent.
Officials believe that Pakistan’s heavy taxation system has been discouraging investment and driving professionals overseas. Many businesses reportedly pay close to 60 percent of their income in taxes and are still asked to pay advance tax. The salaried class has also faced higher deductions, with withholding tax on salaries rising 55 percent last year to Rs. 605.6 billion.
Despite these pressures, Pakistan continues to face a revenue shortfall. The Federal Board of Revenue (FBR) collected Rs. 3.83 trillion between July and October against a target of Rs. 4.1 trillion. Both income and sales tax targets were missed, though customs duty slightly exceeded expectations.
The International Monetary Fund (IMF) is expected to oppose any major tax reductions during its ongoing loan programme. Officials said the plan may move forward only after the bailout ends. However, the IMF has also expressed concern about multinational firms exiting Pakistan due to high operating costs.
Tax filings have improved by 17.6 percent to 5.9 million this year but still fall short of the 7.8 million recorded previously. The government has ruled out a blanket deadline extension, allowing only hardship cases to apply.
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Prime Minister Shehbaz Sharif has formed a working group to review customs tariffs, trade issues, and dumping practices in collaboration with business leaders. The government hopes that by improving the tax structure, Pakistan can attract investment, retain skilled talent, and strengthen its economic base.
