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A delegation of the Federation of Pakistan Chambers of Commerce and Industry met with senior members of the business community, recently with the country’s top military officials. According to an official statement, military leaders promised full support to restore Pakistan’s struggle economy.
Following this engagement, after a large number of markets were closed in the two largest cities of Pakistan, he called the traders’ calls for protests in response to the Finance Act, 2025 anti -business tax policies.
The Finance Act significantly enhances the implementation of the Federal Board of Revenue. It introduced provisions such as the Sales Tax Act, Section 37A and 37B in 1990, which has given tax officials the authority to detain individuals. The Income Tax Ordinance, Section 21 () of 2001, imposes a fine on cash transactions over Rs 200,000, while the Customs Act, under section 40 (C) of 1969, decides the digital invoicing under the SRO 709 and the E -Bullet Enforcement.
Business leaders expressed their gratitude to the military’s directive for suspending the implementation of the clauses related to the arrest and encouraged the tax officials to enter a meaningful dialogue with stakeholders. The delegation also focused on the wider economic challenges facing the industrial sectors. Export facility scheme, especially cotton and yarn, were flagged as a key concern for delaying the policy of removal of the yarn from its love.
The implementation of 18 % sales tax on essential imports deepens the crisis only for exporters. The delegation called on the authorities to review interest rates, and bring it closer to inflation. This message was unclear: Without the belief of financial flexibility or policy, financing will continue to eliminate Pakistan’s productive sectors.
Until the budget meeting, the government’s story was full of economic recovery, investors’ confidence and fair promises. There were high expectations that the government would reduce the burden on the salaried class, provide a breathing room for a formal business and initiate structural tax reforms. The budget has eliminated those hopes. The Finance Act, 2025, has revealed a short -looking, maximum strategy of taxes that already have an inappropriate impact on the tax net, leaving the non -declared classes.
This document lacks both vision and practice. In the Finance Act, there is no evidence of a strategic plan to expand the tax base or accelerate the key sectors of the economy. Instead, dependence on indirect taxes, especially as a basic source of taxes, continues to stop the taxes.
Sync businesses have effectively created tax collector who tolerates a Brent system without any compensation. Under the new budget, under section 153, withholding tax rates have increased by 15 % for services. The disturbing thing is that it is considered to be the least tax, non -adjustable against the actual profit, which makes it a fixed financial burden, regardless of business performance.
This tax form ignores operational facts. Even loss businesses are subject to deduction. Such provisions eliminate the principle of tax justice and reflect the complete disconnection between the policy formation and the real world business conditions. The summary is that companies are now paying taxes, not on profit, but on transactions, which are practically effectively seizing up to 15 % of the total income, regardless of this.
The number of headlines from the financial year 2023-24 suggests a strong performance with tax revenue, targeting Rs 9.3 trillion, indicating a 30 % annual increase. However, this is a success. About half of the income (Rs 4.46 trillion) came from the income tax and more than 60 % of it (about 2.67 trillion rupees) was deposited through a procedure. The role of the corporate sector has been important as a collection agent. Nevertheless, despite its facilitator, the sector does not receive any reward.
The document lacks both vision and practice. In the Finance Act, there is no evidence of a strategic plan to expand the tax base or accelerate the key sectors of the economy. Instead, indirect taxation continues.
Refund, which creates a lifeline for many companies, prevents disobedience. This exercise stimulates legitimate business funds, and forcing firms into liquidity crises. In many cases, the release of a refund requires intervention by the advanced political leadership, which should be implemented automatically. It is a deeply serious process that disrupts confidence and reduces economic tension.
Waiting, fiscal year 2025-26 offers even more aggressive goals. The purpose of the government is to increase Rs 14.13 trillion by 18.7 % over last year. Of this, Rs 6.9 trillion is likely to come from direct taxes. If this trend continues, it is estimated that only 4.1 trillion rupees will be raised through advance prevention. From this point of view, only cash flow discomfort will increase, which is already in the formal business. Startup, small and medium -sized businesses and exporters will suffer the most, as these taxes reduce their limited working capital and limit growth.
Excessive dependence on withholding is not just regressive, it is also contradictory. It strengthens the informal economy by punishing those who choose compliance. The state continues to ignore large -scale, low -tax sectors like agriculture, retail trade and real estate, sectors that contribute more than half of the national GDP. Instead, people already in the tax net are also squeezed. This strategy eliminates formality and encourages regulatory theft.
Meanwhile, SRO -709 has a lack of steps like e -Bullet and Digital Invoice, Bill as a modernization tools, infrastructure supporting infrastructure. The sudden implementation of these digital mandate has led to confusion, compliance costs and operational risks. Instead of promoting digital change, policies take the risk of paralyzing small businesses that already work on the narrow margins. Real modernization requires step -by -step implementation, institutional support and stakeholder alignment, none of them have been ensured.
There is more problem that the Sales Tax Act 1990’s new clauses implemented under Section 37A and 37B. By giving tax officials, the option of detaining people without finalizing the urban responsibility, the option of detaining people without proper action is not correction – this is a repression. These provisions have created a climate of fear, which has turned the tax offices into a zone of oppression rather than compliance.
A financial policy made on risks rather than trust is not sustainable. It destroys governance, disrupts business continuity, and also prevents domestic and foreign investment. Real reforms demand a point of view, not speed. Policy makers should now go away from the plans of force and make a structure based on equity, transparency and credibility. Taxing should be a common responsibility, not unilateral. This requires a strong method of simplifying the rules, expanding the tax base, meaningful dialogue with stakeholders and resolving dispute resolution. The reforms should be about creating value, not just about it.
The illusion of financial power generated by record income masks a weak economic core. The state is relying on the sources that it relies on, allowing formal businesses, salaried professionals and corporate organizations, while unmanaged sectors to flourish in the shadow. Pakistan cannot afford to separate its productive class through fear and financing.
The Finance Act 2025, although its numbers are aggressive, but fairly low. This is a budget for lost opportunities, a short -term document and a government that is more than a collection of course correction. The state will be caught in the stagnation, as long as the minimum will be removed and provides less to all unless it explains its social contract with the business community and taxpayers.
The path forward is clear. It requires basic structural reforms, institutional accountability, comprehensive policy design and real commitment to economic justice. Now the only question is, is there a political will to follow this path?
Dr. Ikramul Haq, author and lawyer of the Supreme Court, is an affiliated teacher at the University of Management Sciences.
Abdul Rauf Shakuri is a corporate lawyer based in the United States.
