SAI calls for tax policy reforms, lower sales tax to spur growth
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In this photo, workers operate a machine at a textile factory. — AFP/File
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KARACHI: The Site Association of Industry (SAI) has called for a tax policy formation and a clear institutional separation between the tax administration to prevent conflicts of interest and to integrate international excellent ways.
Comparing models in the UK and neighboring countries, the SAI proposed a structure where the tax policy is taken over by the Finance Ministry, the distribution of revenue administered by an independent finance commission, and a dedicated consumption tax used by a dedicated council.
In his budget proposals, SEI President Ahmed Ezem Elvi and former President Riaz Adin, who headed by the Association’s Tax Committee, emphasized the need to convert the budgeting process into a strategic economic device rather than continuing as a routine financial exercise.
To deal with systemic weaknesses in the tax framework, Sai noted that Pakistan’s income tax base is narrow-only 9-10 % of GDP-while the formal industrial sector bears the burden of unauthorized tax. The Association called for expanding the tax net to include unpaid and controlled sectors, and recommended that the maximum income tax rate on business income over the next three years is 25 %. It also demanded the abolition of super tax, in which it has been declared old and incompetent, and has been relieved of Ben Corporate and Individual Profit Taxes.
Alvi and Riyadh expressed serious concern over the amendments submitted by the Income Tax Ordinance IV of 2025, especially in Section 138 (3A), 140 (6A) and 175C. According to SAI, these changes provide excessive powers to the tax authorities and violate Articles 4, 18 and 77 of the Constitution. The Association warned them of their immediate return, warning such measures could stop compliance, promote informally and lose investors’ confidence.
On the sales tax reform, SAI highlighted the long -standing issues arising from over -leaping the federal and provincial jurisdiction. It proposes the General Sales Tax (GST) government with harmony, which has been supported by the same compliance portal, which allows smooth cross -aggressive input tax adjustment. The association also demanded a high -speed refund method, along with the refund payment orders (RPOs), should be issued immediately after five working days and payments should be implemented.
SAI expressed concern over the current joint sales and a further tax rate of 22 %, saying it promotes tax evasion and hinders the economy. It was recommended to review the rate structure to reduce the deterioration and encourage registration.
The association called on the government to implement a gradual reduction in the sales tax rate, targeting 15 % in the next three years. It argued that this would reduce the cost of doing business for the formal sector and mobilize economic growth.
SAI also demanded the elimination of additional sales tax, which it claimed to have made businesses stay in the informal sector by avoiding registration and tax responsibilities. The association said, maintains a cycle of non -compliance that hinders formal economic development.
It has further recommended maintaining sales tax exemptions on basic foods, pharmaceuticals and education equipment, such as essential items, which noted their importance in protecting inflation from inflation.
According to the Association’s assurances made by the Finance Minister during his June 2024 budget speech in June 2024, the export facility requested a zero rating for the schemes and the educational stationery. He believes that restoration of these exemptions will support the export sector and reduce the financial burden on educational institutions. SAI proposed a low sales tax rate of 5.0 % on other essential and deserving items to further eliminate consumer problems.
The SAI also demanded the elimination of sales tax exemptions related to the area in the former tribal areas (FATA/PATA), and argued that such exemptions should end in achieving uniformity of nationwide taxes and wider financial reform.
Alvi and Riyadh highlighted the need for comprehensive reforms in Pakistan Customs, citing outdated laws, tariff pieces, underweighting and weak implementation. The Association recommends reviewing the customs act, facilitating duty structures and introducing a united diagnosis and diagnostic system to align with the WTO and WCO standards. It suggested the port to nominate the admission port as the only point to collect the tax so as to prevent leakage and simplify the movement of goods abroad.
On social welfare schemes, SAI criticized the management of employees’ welfare funds such as EOBI, PESI/Sessi, WWF, and WPPF. Employees have been provided with large -scale financing, these schemes provide little influence to partners. The SAI advocated the integration under a united authority, centrally ruled and supported it through digital platforms, which has a tripartite representation of employers, employees and regulators. It suggested that the mobile payment should be provided through the system, and that health care and related services should be outsourced to third -party providers.
