Mixed Response to Federal Budget 2025-26 from Karachi Business Community

Strategic Insights -

The Karachi business community has given a divided response to the federal budget for the fiscal year 2025-26, with different business leaders expressing distinct views on the proposed measures. While some welcomed steps to curb taxpayer harassment and simplify income tax returns for small and medium-sized enterprises (SMEs) and salaried individuals, others criticized the increase in the tax collection target, the lack of meaningful relief for taxpayers, and the absence of transformative policies for the corporate sector.

Key Takeaways:

  • Atif Ikram Sheikh, president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), welcomed the measures to curb taxpayer harassment and introduce a simplified income tax return form for SMEs and salaried individuals.
  • The Overseas Investors Chamber of Commerce and Industry (OICCI) expressed disappointment at the limited progress in addressing inequities in corporate tax rates and the lack of meaningful cuts in government expenditure.
  • Zubair Motiwala, chairperson of the Businessmen Group (BMG), labelled the budget a "camouflage budget" and expressed strong reservations over its unrealistic targets and lack of meaningful relief for taxpayers.
  • Muhammad Jawed Bilwani, president of the Karachi Chamber of Commerce and Industry (KCCI), outright rejected the budget, arguing that it fails to offer any tangible relief to either the industrial sector or the general public.
  • The OICCI highlighted the importance of a comprehensive overhaul of the tax structure to enhance Pakistan's competitiveness and attract foreign investment.
  • The Businessmen Group stressed the need for gradual rationalisation of tax slabs and a reduction in the overall tax burden on businesses to foster a more investment-friendly environment.
  • Zubair Motiwala questioned how the government would achieve its new targets, particularly given the prevailing economic fragility, high inflation, and IMF-imposed constraints.
  • The OICCI noted that meaningful cuts in government expenditure could have helped narrow the fiscal deficit.
  • Bilwani warned that unless the high costs of energy and borrowing are tackled urgently, many businesses risk collapse.

Statistics:

  • The budget sets a tax collection target of Rs2,500 billion for the fiscal year 2025-26.
  • The tax exemption threshold for salaried individuals has been increased from Rs600,000 to Rs1.2 million.
  • The tax rate for salaried individuals has been reduced from 5.0 per cent to 1.0 per cent.
  • The government plans to abolish duty on property transfers.
  • The OICCI estimates that the informal economy in Pakistan is around Rs9 trillion.

Sources:

  • Atif Ikram Sheikh, president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), quoted in Dawn, "Business community welcomes some budget measures, criticises others".
  • Zubair Motiwala, chairperson of the Businessmen Group (BMG), quoted in Dawn, "Businessmen Group rejects budget, calls it 'camouflage budget'".
  • Muhammad Jawed Bilwani, president of the Karachi Chamber of Commerce and Industry (KCCI), quoted in Dawn, "KCCI rejects budget, says it fails to offer relief to industry".
  • The Overseas Investors Chamber of Commerce and Industry (OICCI) quoted in Dawn, "OICCI disappointed with budget, calls for comprehensive tax overhaul".