The Institute of Cost and Management Accountants of Pakistan (ICMAP) has presented a comprehensive tax framework to the government, specifically designed to foster the growth of the Electric Vehicle (EV) manufacturing sector in Pakistan. This proposal forms part of ICMAP’s broader tax recommendations for the upcoming federal budget for the fiscal year 2025-26.
Phased Taxation Model Recommended for Nascent Industry
Recognizing the significant potential of Pakistan’s burgeoning EV industry, ICMAP has advocated for a taxation approach that carefully balances the need for revenue generation with the imperative of supporting sustainable industry expansion. The institute has proposed a phased taxation model for EV manufacturers, starting with a lower tax rate on profits, ranging from 10% to 15%, during the initial years of operation. This rate would then gradually increase to 20% to 25% over a five-year period.
Framework Aims to Attract Investment and Enable Scaling
According to ICMAP, this proposed framework is strategically designed to integrate EV manufacturers into the national tax system without imposing an excessive burden on a sector that is still in its early stages of development. The proposal underscores that establishing a structured and predictable tax environment is crucial for attracting both domestic and foreign investment. This stability would also enable EV companies to effectively scale their operations before facing higher tax obligations.
ICMAP Highlights Economic and Environmental Benefits
“The Electric Vehicle sector is a promising avenue for economic growth and environmental sustainability,” stated a spokesperson for ICMAP. “Our proposed framework allows space for the industry to grow while ensuring long-term contribution to national revenues.”
ICMAP estimates that the implementation of this phased tax framework could lead to a substantial expansion of the national tax base. By the year 2030, the institute projects that the EV sector could potentially contribute between PKR 10 billion and PKR 20 billion annually in tax revenue. Furthermore, a stable fiscal environment is expected to attract greater foreign direct investment (FDI) in EV manufacturing, which would in turn support the creation of local jobs and assist Pakistan in its efforts to reduce carbon emissions.
Proposal Aligns with Government’s Green Development Goals
The ICMAP’s proposal is in line with the government’s stated green development objectives and reflects the institute’s commitment to promoting sustainable economic policies. ICMAP emphasized that a thriving EV industry has the potential to play a vital role in Pakistan’s future, delivering significant economic, environmental, and employment benefits to the nation.
Call to Policymakers for Forward-Looking Approach
ICMAP concluded that adopting a forward-looking tax framework is not solely about generating tax revenue but also about creating an enabling ecosystem for an entire industry to flourish in a globally competitive market. The institute has strongly urged policymakers to consider and adopt this phased approach in the upcoming budget, ensuring that economic growth is both inclusive and environmentally responsible.
