The Pakistan Business Council (PBC) has warned that the Capital Value Tax (CVT) on foreign assets is forcing wealthy Pakistanis to surrender their nationality, urging the government to introduce major tax reforms in the upcoming federal budget 2026–27.
In its budget proposals, the PBC said the current CVT regime is discouraging investment, damaging Pakistan’s international image, and accelerating capital flight.
The business advocacy body noted that the Capital Value Tax on foreign assets was introduced through the Finance Act 2022 and is being imposed in addition to income tax already paid on those assets, significantly increasing the overall tax burden on taxpayers.
According to the council, the combined impact of CVT and income tax has made taxation excessively high even on modest investment returns. The PBC highlighted an example where a foreign deposit of $100 earning 4% annual interest could face an effective tax burden of nearly 60% on the income generated.
“The tax is contested in the Supreme Court and is causing wealthy Pakistanis to surrender passports,” the council stated in its recommendations.
The PBC said the current tax structure is influencing residency decisions, encouraging relocation abroad, and weakening investor confidence in Pakistan’s economy.
To address the issue, the council recommended abolishing the Capital Value Tax on declared foreign assets altogether. However, if the government chooses to retain the tax, the PBC proposed reducing the rate to 0.25% of actual asset cost and allowing full adjustment against income tax liabilities.
The council also called for restoring tax residency rules to the framework that existed before the Finance Act 2022, arguing that such reforms would help retain national wealth and improve Pakistan’s attractiveness for foreign direct investment.
Apart from CVT reforms, the PBC presented a broader set of recommendations for Budget 2026–27 focused on corporate taxation, compliance reforms, and investment facilitation.
The council recommended gradually reducing the corporate tax rate from 29% to 25% over three years, starting with listed companies, while also proposing a phased withdrawal or sunset timeline for the super tax.
To improve tax compliance, the PBC suggested imposing higher withholding taxes on non-filers, while simultaneously providing relief to exporters by removing advance tax on export proceeds and addressing distortions in the Export Facilitation Scheme.
On capital gains taxation, the council proposed eliminating tax on the sale of shares in unlisted companies after a six-year holding period. It also recommended reducing or abolishing minimum tax requirements and extending the carry-forward period for business losses.
Other proposals included introducing mandatory electronic data interchange systems for imports under free trade agreements, publishing customs valuation data to prevent under-invoicing, restoring group taxation benefits, and easing restrictions on corporate loss adjustments.
The PBC further called for abolishing CVT entirely or significantly reducing it with full income tax credit, removing the 9% surcharge on salaried individuals, restoring higher income tax thresholds, speeding up tax refunds within 60 days, simplifying exemption procedures, and aligning real estate valuations with actual market rates.
The recommendations come as the government prepares the federal budget for fiscal year 2026–27 amid ongoing efforts to improve revenue collection and attract investment into the country.
