The Pakistan Business Council (PBC) has proposed a number of changes to the minimum tax system for listed companies in Pakistan:
- Elimination of Minimum Tax: The PBC recommends completely abolishing the current minimum turnover tax of 1.25%. They argue this rate is too high and hurts business growth.
- Gradual Reduction (if not eliminated): As an alternative, the PBC suggests a gradual decrease of 0.25% annually until the minimum tax reaches 0.5% by the 2027 tax year.
- Extended Carry Forward Period: The current system allows companies to carry forward unused minimum tax for three years to offset future taxes. The PBC proposes extending this period indefinitely or to a more reasonable timeframe like ten years. This would be particularly helpful for startups and companies with high initial investments.
- Refund for Excess Minimum Tax: The PBC recommends that companies that have paid more in minimum tax than their actual tax liability in the past two years should be eligible for a refund, especially in cases of losses due to economic downturns.
Overall Impact (if implemented):
- Reduced tax burden on listed companies.
- Increased profitability and reinvestment in businesses.
- Potential for long-term economic growth.
- Encouragement for long-term planning and investment.
Many listed companies in Pakistan are struggling due to economic difficulties. The PBC argues that the current minimum tax system adds unnecessary strain, especially with the limited carry forward window. Their proposal aims to alleviate these challenges and promote economic activity.
