By Ayesha Saba

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed a broad package of industrial tax reforms for the federal budget FY2026-27, arguing that lower tax rates and reduced fiscal burden on businesses are essential to revive manufacturing activity, attract fresh investment, and strengthen Pakistan’s industrial competitiveness.

According to the FPCCI budget proposals document available with Wealth Pakistan, the business body has recommended reducing the corporate income tax rate for manufacturers from 29% to 20%, alongside reforms in super tax and turnover tax structures to support industrial growth.

The document states that manufacturers currently face a corporate income tax rate of 29%, in addition to Workers Welfare Fund (WWF) contributions of 2% and Workers Profit Participation Fund (WPPF) payments of 5%, resulting in a combined burden of 36%.

FPCCI noted that the current tax structure has affected business expansion, modernization efforts, and foreign direct investment inflows. It maintained that high taxation limits the ability of industries to reinvest earnings into capacity expansion, technology upgrades, and productivity improvements.

The chamber also proposed abolishing super tax under Section 4C, particularly for the manufacturing sector, stating that the tax has reduced liquidity available to businesses and discouraged investment and expansion activities.

According to the proposals, the super tax was introduced in tax year 2022 and has since been extended in subsequent years with broader applicability. FPCCI argued that the continuation of the tax has increased financial pressure on industries already facing elevated production costs and challenging business conditions.

In addition, the business body recommended reducing turnover tax under Section 113 from 1.25% to 0.5%.

It said the existing turnover tax has become more burdensome amid rising energy prices and increasing raw material costs. The organization noted that the tax functions as a burden on business capital, particularly for documented enterprises operating on thin margins.

The proposals further highlighted that many industries continue to face pressure from high utility costs, financing expenses, and exchange rate fluctuations, which have affected their operational efficiency and profitability.

FPCCI stressed that creating a growth-oriented taxation environment would support industrialization and generate broader economic activity. It maintained that tax policies should increasingly focus on expanding economic output instead of prioritizing short-term revenue collection objectives.

The organization emphasized that improving industrial competitiveness could also contribute to export growth, investment inflows, and employment generation over the long term.

According to the FPCCI document, the proposed measures are intended to create a more supportive business environment through tax rationalization, improved competitiveness, and stronger incentives for productive investment across industrial sectors.

Credit: INP-WealthPk