Pakistan’s business community, led by the Karachi Chamber of Commerce and Industry (KCCI), has voiced strong concerns over the rising tax burden on already compliant businesses. In its Federal Budget 2025-26 proposals to the Ministry of Finance, KCCI has called for a broader tax net—urging authorities to register 4.6 million unregistered industrial and commercial entities identified through official data.
Existing Taxpayers Under Pressure
KCCI argues that Pakistan’s current tax regime is unfairly biased against compliant businesses, which continue to face higher taxes and additional duties, while a significant number of potential taxpayers remain outside the system.
“Data from the National Electric Power Regulatory Authority (NEPRA) shows 4.6 million commercial and industrial electricity connections till June 2024, yet only 396,383 are registered for sales tax,” KCCI reported.
The chamber believes this huge discrepancy points to untapped potential that could significantly boost government revenue—without burdening existing taxpayers.
Call for Data-Driven Taxation
KCCI recommends the use of readily available datasets—including electricity and gas utility records, property and vehicle registrations, bank transactions, and travel histories—to bring non-compliant entities into the tax system.
According to the chamber, such steps would:
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Improve equity and compliance
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Enhance revenue without increasing tax rates
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Reduce reliance on harsh measures like the Further Tax
Current Tax Compliance and Shortfall
As of November 6, 2024, the Federal Board of Revenue (FBR) received 5.215 million tax returns, marking a 76% increase year-on-year. However, tax collection during July-April FY2024-25 totaled Rs9,309 billion, falling Rs821 billion short of the Rs10,130 billion target.
The government has since revised FBR’s target down from Rs12,913 billion to Rs12,334 billion, but a full-year shortfall of over Rs600 billion is still projected. Meanwhile, next year’s target (FY2025-26) is expected to rise to Rs14,300 billion, making it crucial to expand the tax base rather than raise taxes further.
KCCI’s Broader Recommendations
In addition to expanding the tax net, KCCI submitted a list of policy reforms aimed at stimulating economic growth and reducing sector-specific tax burdens:
1. Export and Industrial Reforms
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Reinstate zero-rating for local supplies under the Export Facilitation Scheme (EFS)
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Zero-rating on gold with at least 20% value addition for export eligibility
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Remove taxes on shrimp broodstock to support seafood exports
2. Manufacturing Support
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Reclassify motorcycle and auto parts as intermediate goods, removing them from the third schedule
3. Sectoral Adjustments
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Review tea industry policies to address revenue leakage
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Implement targeted relief for struggling yet high-potential sectors
Conclusion
KCCI’s proposals highlight a clear path: broaden the tax net, ease the burden on compliant businesses, and encourage sustainable growth. As the government prepares to unveil the Federal Budget 2025-26, these recommendations offer practical strategies to increase revenue without stifling the productive economy.