[Karachi – June 2025]- Ahead of the Federal Budget announcement on June 10, ICMAP has recapped the key budget policy recommendations it submitted to FBR by the deadline of January 31, 2025. The proposals aim to broaden the tax base and create a fairer, more transparent taxation system that supports Pakistan’s economic development and reflects its social priorities.
To enhance revenue and reduce inequality, ICMAP proposed integrating exporters into the normal tax regime, eliminating preferential treatment under the final tax regime. This would ensure a fair and uniform tax structure across sectors. Furthermore, ICMAP recommended the simplification of personal income tax slabs into five categories, with a progressive tax rate structure capping at 45% for non-salaried individuals.
To introduce fairness in wealth distribution, ICMAP suggested imposing a wealth tax on the top 0.5% of households, with rates ranging from 1.7% to 3.5%, modeled after Spain’s featherlight approach. A real estate wealth tax was also proposed for individuals holding property assets above PKR 50 million, at rates between 0.5% and 1.5%.
ICMAP also recommended taxing high-value pension income by proposing a 10% tax on monthly pensions exceeding PKR 200,000, while safeguarding lower-income retirees. Additionally, it suggested capping the tax-free limit of employer-provided health insurance benefits at PKR 500,000 per year, with any excess to be treated as taxable income.
To address gaps in digital taxation, ICMAP proposed a 3.5% Public Broadcasting Contribution Tax on social media income exceeding PKR 5 million annually, along with a tax on digital subscription platforms such as Netflix and Disney+ to ensure fair competition with local media.
To broaden the tax net, ICMAP called for a standardized 15% tax rate on currently exempt or lightly taxed sectors such as real estate investments, electric power generation projects, jewelry, cinema operations, venture capital, and tourism. This would help reduce sectoral distortions and promote fairness.
In an effort to close tax avoidance loopholes, ICMAP proposed introducing an 18.5% Minimum Alternative Tax (MAT) for companies declaring accounting profits but avoiding income tax. This measure is aimed at curbing tax planning practices that erode the tax base.
To strengthen compliance, ICMAP advocated for a Compliance Risk Management framework in key cities, using third-party data analytics to target tax evasion more effectively. It also proposed setting up a Tax Policy Unit within the Ministry of Finance, staffed with cost and management accountants and other professionals, to ensure evidence-based tax policy development.
For small businesses and traders, ICMAP recommended enhancing the Tajir Dost Portal by simplifying tax structures, automating calculations, and integrating pre-filled tax returns. This, along with AI-powered compliance tracking, would reduce the compliance burden and increase documentation.
Finally, to regulate the growing e-commerce sector, ICMAP proposed applying VAT or GST on cross-border digital sales to ensure parity between domestic and foreign sellers. It also advised streamlining the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) systems using automation and real-time reporting.
ICMA report can be downloaded from link:
