Govt plans tax cuts to boost exports

August 08, 2025 (MLN): The Government has considered a series of long-term tax reforms and export incentives as part of its industrial policy revamp aimed at stimulating investment and improving international competitiveness.

In a meeting held Thursday in Islamabad, sub-committees on tax rationalization and export enhancement working under the country’s broader industrial policy framework proposed reducing the corporate income tax rate from the current 29% to 26% over three years.

The meeting was chaired by Haroon Akhtar Khan, Special Assistant to the Prime Minister on Industries and Production, and attended by Prime Minister’s Coordinator Rana Ehsan Afzal, Federal Board of Revenue representatives.

Haroon Akhtar Khan said Pakistan’s corporate tax rate remains significantly higher than regional competitors such as Vietnam, where the rate is capped at 17% and argued that a lighter tax burden could enhance business performance and economic activity.

The sub-committees also recommended a restructuring of the super tax regime.

The proposal includes applying the tax only on additional income rather than total profits gradually reducing the rate to 5% over five years, with a view to eliminating it entirely in the sixth year if Pakistan achieves a primary fiscal surplus.

To improve export performance, the meeting proposed introducing a new Drawback of Local Taxes and Levies (DLTL) scheme along with ensuring the timely release of sales tax and income tax refunds.

Haroon Akhtar Khan endorsed a plan to disburse sales tax refunds within 72 hours backed by a dedicated monitoring mechanism.

Other measures under discussion included eliminating cross-subsidies in industrial electricity tariffs removing advance taxes on exporters simplifying banking procedures for export-related transactions and offering export financing at interest rates 500 basis points below the prevailing policy rate.

Khan reaffirmed the government’s commitment to prioritizing exports noting that high interest rates, expensive utilities, and a heavy tax burden continue to challenge exporters.

He conveyed Prime Minister Shehbaz Sharif’s directive to make export-led growth a national priority.

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