SAI urges tax reforms in budget proposals

Calls for separation of tax policy and administration, rollback of recent ordinance changes

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KARACHI:

The SITE Association of Industry (SAI) has submitted its budget proposals for 2025-26, urging the government to adopt structural tax reforms aimed at boosting industrial growth and improving export competitiveness.

SAI President Ahmed Azeem Alvi, who also heads the association's taxation committee, stressed that budget-making must evolve into a strategic economic exercise rather than remain a routine fiscal event.

A central proposal is the separation of tax policy formulation from tax administration to avoid conflicts of interest. Citing global best practices, SAI recommended assigning tax policy to the Ministry of Finance, entrusting revenue sharing to an independent finance commission, and regulating consumption taxes through a dedicated council.

SAI highlighted that Pakistan's narrow income tax base — just 9% to 10% of GDP — forces the formal industrial sector to shoulder an unfair tax burden. The association urged expansion of the tax net to include untaxed and under-taxed sectors and proposed capping the income tax rate on business income at 25% over the next three years.

The group also called for the abolition of the super tax, labelling it outdated and inequitable, and sought relief on inter-corporate and individual dividend taxation.

Expressing concern over recent changes to the Income Tax Ordinance via Ordinance IV of 2025, particularly to Sections 138(3A), 140(6A), and 175C, SAI argued these amendments give unchecked powers to tax officials and violate Articles 4, 18, and 77 of the Constitution. It warned the measures would deter compliance, promote informality, and hurt investor confidence.