SITE Association of Industry Proposes Comprehensive Budget Recommendations for Pakistan's Federal Budget 2025-26

Strategic Insights -

The SITE Association of Industry (SAI) has submitted a comprehensive set of budget proposals for the Federal Budget 2025-26, advocating for policy measures to stimulate industrial growth and enhance Pakistan's export competitiveness. SAI President Ahmed Azeem Alvi and former president Riaz Uddin emphasized the need to transform budget-making into a strategic economic tool rather than a routine fiscal exercise. The industry body proposed institutional separation of tax policy formulation and tax administration, citing global best practices. SAI also recommended widening the tax net, capping the maximum income tax rate, and abolishing the Super Tax, among other proposals.

Key Takeaways:

  • SAI proposed institutional separation of tax policy formulation and tax administration, aligning with global best practices, such as the UK model.
  • The association recommended widening the tax net to include all untaxed and under-taxed sectors, with a capping of the maximum income tax rate on business income at 25% over the next three years.
  • SAI advocated for the abolition of the Super Tax, terming it an outdated and unjust burden, and called for relief on inter-corporate and individual dividend taxation.
  • The industry body stressed the need for expeditious refund mechanisms, with refund payment orders (RPOs) to be issued within five working days of claim submission and payments processed shortly thereafter.
  • SAI proposed a harmonized General Sales Tax (GST) structure supported by a single compliance portal, enabling seamless cross-jurisdictional input tax adjustments.
  • Concerns were raised about the prevailing 22% combined sales tax rate, which the association believes fuels evasion and hinders formalization of the economy.
  • SAI urged the government to implement progressive reductions in the sales tax rate, targeting a 15% rate over the next three years, to lower the cost of doing business and promote economic growth.
  • The association also recommended maintaining exemptions on essential goods, including basic staple foods, pharmaceuticals, and education-related products, and reinstating zero-rating on export facilitation schemes.
  • SAI proposed the introduction of a lower sales tax rate of 5% for other essential and deserving items to further reduce financial strain on consumers.

Statistics:

  • Pakistan's income tax base remains narrow, at just 9 to 10% of GDP.
  • The formal industrial sector bears a disproportionate tax burden.
  • The Super Tax affects a significant portion of the business sector in Pakistan.
  • The average refund time for sales tax claims in Pakistan is over six months.
  • The 22% combined sales tax rate contributes to evasion and hinders formalization of the economy.

Sources:

  • Press release by the SITE Association of Industry (SAI)
  • Recommendations submitted by SAI to the Federal Budget 2025-26