The Karachi Tax Bar Association (KTBA) has formally presented its detailed tax proposals for the forthcoming Budget 2025–26 to the Federal Board of Revenue (FBR) Chairman, Rashid Mahmood Langrial. The association’s recommendations emphasize the establishment of a tax regime that is balanced, efficient, and prioritizes the taxpayer.
The proposals cover a range of reforms in both direct and indirect taxation, aiming for systemic improvements that simultaneously protect the rights of taxpayers and foster revenue growth for the government. The KTBA’s submission is a continuation of its ongoing dialogue with tax authorities and builds upon its prior recommendations.
The KTBA has highlighted critical areas requiring attention in the Budget 2025–26. These include addressing existing shortcomings in Pakistan’s tax appellate structure, simplifying the digital tax filing system (IRIS), and implementing fairer tax policies.
Reforming the Appellate System for Clarity and Efficiency
A central tenet of the KTBA’s budget recommendations is a thorough review of the recent amendments made in May 2024 to the appellate structure under the Income Tax Ordinance, 2001, and the Sales Tax Act, 1990. While these changes aimed to enhance efficiency through defined pecuniary jurisdiction and time limits, the KTBA contends they have inadvertently led to increased confusion and delays, escalating the burden on taxpayers and contributing to unnecessary litigation and discontent.
To rectify this, the association proposes a review to ensure legal frameworks are in harmony with practical implementation. Furthermore, the KTBA advocates for the introduction of a settlement scheme for pending tax disputes. This scheme would involve the payment of eligible taxes while waiving penalties and ineligible taxes, aiming to rebuild confidence in the tax system.
Enhancing Transparency and Ensuring Fairness
To improve transparency in communication between the FBR and taxpayers, the KTBA has proposed extending the use of system-generated barcodes, currently utilized for Income Tax notices, to Sales Tax notices as well. This measure is intended to combat the issuance of fraudulent notices and ensure all communications are traceable and verifiable.
Advocating for Relief for Individual Taxpayers
Acknowledging the impact of inflation and the financial pressures on low- and middle-income individuals, the KTBA has urged the government to raise the basic income tax exemption threshold for Budget 2025–26 from the current Rs. 600,000 to Rs. 1,000,000. The association also called for a reduction in the top income tax slab rate of 45% for incomes exceeding Rs. 5.6 million, arguing that this rate is regressive and disproportionately high when compared to corporate tax rates.
Supporting Businesses and Improving System Functionality
The KTBA’s proposals also include a recommendation to reduce the minimum turnover tax rate (Section 113) from 1.25% to 0.75%. This reduction is specifically proposed to alleviate financial strain on small businesses, startups, and entities experiencing losses, thereby encouraging entrepreneurship.
In addition to policy recommendations, the association has compiled a detailed annex (Annex C) outlining technical glitches identified within the IRIS system. The annex also provides concrete suggestions for making the system more accessible and user-friendly for taxpayers.
In concluding their submission, the KTBA expressed its readiness to engage in further detailed discussions with the FBR to elaborate on their proposals. The association underscored the importance of cooperation, transparency, and a commitment to fairness as essential elements for meaningful tax reform in the upcoming budget. The KTBA reiterated its conviction that a just and taxpayer-friendly tax regime is crucial for long-term economic sustainability and that Budget 2025–26 presents a significant opportunity to achieve this objective.
