Islamabad, June 5, 2023: In an effort to stimulate economic growth and increase revenue collection, the Overseas Investors Chambers of Commerce and Industries (OICCI) has presented its taxation proposals for the upcoming 2023-24 budget to Finance Minister Ishaq Dar. The OICCI emphasizes the need to abolish the super tax and bring the trade, services, real estate, and agriculture sectors under the tax net, aligning with their respective contributions to the economy.
Abolishing Super Tax and Capping Corporate Tax Rate:
The OICCI has recommended the complete elimination of the super tax across all sectors, coupled with a proposal to cap the corporate tax rate at 29%. It highlights that the current effective tax rate surpasses regional competitive rates and advises against further increases that could potentially impede the profitability of tax-paying sectors.
Reduction in Minimum Tax and Simplification of Withholding Tax Regime:
To alleviate the burden on businesses, the OICCI suggests reducing the general rate for minimum tax to 0.25% and allowing the carry forward of minimum tax credit for up to five years preceding 2022. Additionally, the chamber proposes simplifying the withholding tax regime, which currently encompasses 200 different tax rates for 24 withholding tax sections. This measure aims to enhance convenience and foster a more business-friendly environment.
Progressive Taxation for Low-Income Individuals:
Recognizing the impact of high inflation on the low-income group, the OICCI recommends raising the tax-free annual income threshold from Rs0.6 million to Rs1.2 million. By easing the tax burden on individuals within this income bracket, the OICCI seeks to provide relief and promote inclusive economic growth.
Broadening the Tax Base for Increased Revenue:
The OICCI underscores the urgent need to broaden the tax base and ensure that revenue collection aligns with the proportional share of each sector in the economy, particularly in trade, services, real estate, and agriculture. By exerting dedicated efforts to collect taxes from all segments, it is estimated that the tax-to-GDP ratio could be increased from the current rate of less than 10% to 16%.
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OICCI President Amir Paracha Stresses the Importance of Tax Reforms:
Commenting on the current economic situation, OICCI President Amir Paracha highlights the stress faced by the economy, with a negative to marginally positive growth forecast for the immediate future. He points out that high inflation, interest rates, and a weakening currency pose significant challenges to the profitability of tax-paying sectors in the coming year. Paracha emphasizes the urgency to implement tax reforms to mitigate these challenges and drive economic recovery.
In conclusion, the OICCI’s taxation proposals aim to foster a conducive business environment, promote economic growth, and enhance revenue collection. As the government prepares for the 2023-24 budget, the recommendations put forward by the OICCI underscore the need for comprehensive tax reforms that will help bolster the economy and ensure a fair and sustainable tax structure for all sectors.
