The Pakistan Business Council (PBC) has issued a stark warning regarding the nation’s high tax rates on salaried individuals, asserting that these elevated rates are a major catalyst for brain drain as skilled professionals seek better financial prospects abroad.
PBC Highlights Disproportionate Tax Burden on Salaried Individuals
In its comprehensive tax proposals submitted to the Federal Board of Revenue (FBR), the PBC underscored the disproportionate tax burden shouldered by salaried employees in Pakistan. Currently, individuals earning salaries face an income tax reaching up to 29%, further compounded by a 10% super tax and a 15% dividend tax. The PBC argues that this heavy taxation regime is actively discouraging talent retention within the country, compelling skilled workers to migrate or opt for employment in the informal, untaxed sectors.
PBC Proposes Lower Taxes to Combat Brain Drain
To combat this concerning exodus of skilled labor, the PBC has urgently recommended a significant reduction in the tax burden imposed on salaried employees. The council proposes a crucial revision of the existing income tax slabs, advocating for adjustments that account for prevailing inflation rates. This, they believe, would create a more equitable and globally competitive taxation structure, making Pakistan a more attractive place for skilled professionals to build their careers.
High GST Rate Incentivizes Tax Evasion
Beyond the pressing issue of salary taxation, the PBC also addressed broader systemic challenges within Pakistan’s tax framework. A key concern highlighted was the General Sales Tax (GST), currently set at a high 18%. In an economy characterized by a substantial undocumented sector, this elevated GST rate inadvertently incentivizes tax evasion.
Call for Gradual GST Reduction
To counter this, the PBC has proposed a measured and gradual reduction in the GST rate by 1% annually, aiming to bring it down to 15%. The council contends that such a phased approach would encourage greater tax compliance and effectively broaden the overall tax base.
Corporate Sector Burdened by High Tax Rate
The PBC further drew attention to the substantial effective 48% tax rate faced by the corporate sector, encompassing corporate income tax, super tax, and various withholding taxes. The council cautioned that this high tax burden diminishes Pakistan’s appeal as an investment destination for both domestic and foreign entities.
Recommendation to Lower Corporate Tax for Investment
To foster a more investment-friendly climate, the PBC recommended a gradual decrease in the corporate tax rate by 1% per year until it reaches 25%, aligning it with rates prevalent in comparable emerging economies.
End Multiple Taxation on Inter-Corporate Dividends
In another significant recommendation aimed at streamlining the tax system and promoting corporate growth, the PBC strongly advocated for the discontinuation of multiple taxation on inter-corporate dividends. The council elucidated that eliminating this practice would not only encourage corporate consolidation and diversification but also bolster the growth of the capital market by attracting a wider range of investors.
PBC Committed to Fair and Competitive Tax Environment
The Pakistan Business Council reiterated its unwavering commitment to collaborating with policymakers to forge a tax environment that is demonstrably fairer, more competitive, and conducive to sustainable economic growth, ultimately enabling Pakistan to retain its valuable human capital and thrive in the global arena.