The federal government has agreed in principle to overhaul the tax framework for Multinational Corporations (MNCs) in an effort to eliminate the multiplicity of indirect taxes on large corporate entities and deter further exits from Pakistan.
The move is part of a broader plan to formulate a new investment and business protection policy aimed at restoring confidence among foreign investors. A key focus is shifting from the longstanding high import-tariff protection model to an export-oriented strategy that encourages efficiency, innovation and global competitiveness.
As part of the reforms, the Federal Board of Revenue (FBR) is expected to revisit its reliance on special concessions under SROs and the current tariff protection structure. The government is also reviewing the applicability of the Federal Excise Duty (FED), which officials say has become an “unfriendly tax” for multinational companies operating in the country. Ending the overlap of indirect taxes for the highest tax-paying and compliant MNCs is among the proposals to ensure a more level playing field.
According to a senior government official, frequent mini-budgets, sudden tax increases—particularly in withholding taxes and FED—and abrupt policy changes have created a climate of uncertainty for MNCs. Field formations within the FBR have also been seeking advance payments from corporates to meet revenue targets, further undermining investor confidence.
Officials noted that FED was initially imposed to curb sugar consumption, yet its burden disproportionately falls on the structured beverage sector, which uses only a small share of the country’s total sugar supply and already discloses caloric information. Meanwhile, major consumers of sugar—such as confectionery manufacturers, bakeries and sweet shops—remain outside the FED net.
Past reductions in FED have resulted in higher revenue collection, a model policymakers believe could also provide relief to MNCs while boosting overall tax receipts.
The Overseas Investors Chamber of Commerce & Industry (OICCI) has called for the creation of a single federal authority to simplify compliance and reduce jurisdictional overlaps. It has also recommended a phased reduction of the corporate tax rate to 25 percent, gradual elimination of the Super Tax and a lower turnover tax for regulated sectors.
Similarly, the Pakistan Business Council (PBC) has advised taxing income rather than declared overseas assets, reducing withholding taxes on exporters and the recycling sector, separating tax policy from the FBR’s administrative role and gradually bringing down the GST rate to 15 percent.
