KARACHI: The private sector has demanded the government to reduce the corporate tax rate to 30 percent from existing 35 percent and further reduce it to 25 percent in next five years.
The private sector proposal paper for budget 2014-2015 said that the corporate sector For companies continue to reduce rate of income tax by one percent so that it is brought down to 30 percent 25 percent in about five years.
The business community informed the tax machinery that corporate tax rate in regional economies is much lower than prevailed in Pakistan. Thus, reducing corporate tax rate to 25 percent will bring the rate inline with the regional tax rates.
The effective corporate in Pakistan is calculated at 41 percent (34 percent income tax [to be applicable in Tax Year 2014], five percent Workers Profit Participation Fund (WPPF); two percent Workers Welfare Fund (WWF).
The business community also highlighted the concerns that due to high tax rates, foreign companies are reluctant to undertake business activities in Pakistan.
The corporate sector in Pakistan also advocated reducing the income tax rate for individual, which was increased phenomenally in the last Finance Act, 2013.
Therefore, it is proposed to reduce the income tax rate for salaried individuals from 30 percent to 20 percent.
The FBR has been informed that salaried individuals are not only the highest in terms of numbers but also the most compliant segment of taxpayers. A sudden increase in the highest slab from 20 percent to 30 percent through the Finance Act 2013 is acting as a disincentive.