By Moaaz Manzoor

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed a series of tax simplification measures for the federal budget FY2026-27, saying that reducing compliance burden and improving business facilitation can strengthen economic activity and improve Pakistan’s business environment.

According to the FPCCI budget proposals document available with Wealth Pakistan, the recommendations focus on reducing procedural complexity, improving tax administration, and easing liquidity pressures on businesses through changes in withholding taxes, refunds, and tax return systems.

The chamber stated that businesses currently face multiple procedural requirements and documentation obligations that increase compliance costs and create operational difficulties, particularly for small and medium-sized enterprises.

Among the key recommendations, FPCCI proposed rationalization of withholding tax rates under Sections 148, 153, 236G, and 236H.

According to the document, taxes collected under these sections operate largely as advance taxes and often create liquidity constraints for businesses because funds remain tied up for extended periods before adjustments or refunds are processed.

The organization maintained that the current system results in working capital shortages and also generates large refund claims for businesses.

FPCCI recommended revisiting the mechanism so that withheld taxes are not treated as minimum tax and businesses can maintain healthier cash flows.

The chamber also highlighted issues relating to tax refund procedures and proposed greater automation in the system.

The document noted that delays and procedural bottlenecks in income tax refunds continue to affect businesses and create liquidity challenges.

FPCCI proposed that auto-verified refunds should be processed automatically without requiring separate appeals or additional refund orders.

It also recommended allowing broader adjustment mechanisms under which taxpayers could adjust refunds against multiple tax liabilities, including cross-adjustment between sales tax and income tax.

The organization further proposed allowing outstanding refunds to be adjusted against super tax liabilities.

According to FPCCI, such measures can improve liquidity conditions and reduce financial pressures on businesses.

The chamber additionally proposed simplifying the income tax return system.

According to the document, the current tax return framework comprises numerous forms and annexures that often create difficulties for taxpayers and increase filing complexity.

FPCCI recommended introducing a more streamlined system with separate forms for different income categories, so that taxpayers complete only the forms relevant to their activities.

The organization stated that better-designed and simplified forms could enable taxpayers to complete filing requirements without requiring advanced technical assistance.

The proposals also include discontinuing annual withholding tax statements because similar information is already available in quarterly returns.

FPCCI suggested that the Pakistan Revenue Automation Limited (PRAL) could automatically consolidate quarterly data and provide taxpayers with editable digital records.

The chamber maintained that reducing procedural duplication could save time and lower administrative burden on businesses.

According to the document, tax simplification and improved ease of doing business remain important for creating a more supportive investment environment and enhancing long-term economic competitiveness.

Credit: INP-WealthPk