Govt announces tax relief and FBR reforms for businesses

By Muhammad Hussain

LAHORE: Minister of State for Finance & Revenue and Railways Bilal Azhar Kiyani has said that the government has introduced major tax relief and structural reforms to reduce the burden on businesses, exporters, salaried persons and small traders, while efforts are being made to transform the FBR into a more transparent, facilitation-oriented and technology-driven institution.

He said super tax had been completely abolished for exporters and businesses with annual income between Rs150 million and Rs500 million, while the rate for companies earning more than Rs500 million had been reduced from 10 percent to 8 percent. For exporters, the tax deduction on export proceeds had also been reduced from 2 percent to 1.25 percent. He said the government was also introducing a new tax operating model featuring centralized and faceless audit and assessment mechanisms to reduce individual discretion, harassment and possibilities of collusion.

He was speaking at the Lahore Chamber of Commerce and Industry (LCCI), where he was received by LCCI President Faheem Ur Rehman Saigol. Senior Vice President Tanveer Ahmad Sheikh, former President FPCCI and LCCI Mian Anjum Nisar, former LCCI President Malik Tahir Javed, Commissioner FBR, Amna Kamal, Commissioner FBR, Shabana Aziz and Executive Committee Members Amir Ali, Syed Salman, Ahad Amin Malik, Mohsin Bashir, Rana Shouban Akhtar, Nadeem Ansari and Irfan Quershi were also present.

Welcoming the Minister, LCCI President Faheem Ur Rehman Saigol said the Lahore Chamber, with around 48,000 member businesses comprising traders, industries and SMEs, represented one of Pakistan’s most important business communities. He said the Chamber’s membership had grown from around 32,000 to 48,000 during the current 2024-26 term.

Appreciating Bilal Azhar Kiyani’s role and his previous engagement with the business community, particularly during discussions on SIFC-related matters, he said Pakistan’s economy had witnessed some encouraging developments, including remittances reaching $41.6 billion and Moody’s upgrading Pakistan’s credit rating from Caa1 to B3. He, however, stressed that taxation, cost of doing business and energy tariffs remained major challenges.

He particularly highlighted the high electricity tariffs, enforcement actions by different government agencies, LDA, RUDA and EPA-related issues, and the rapid conversion of agricultural land into housing schemes. He said the government must protect the country’s productive agricultural land and broaden the tax base.

He also expressed concern over the proposed relocation of 8,000 to 10,000 industries, saying Pakistan lacked the industrial zones and infrastructure required to relocate even a fraction of these units within a short period. He urged the government to adopt a practical and consultative approach to industrial relocation and provide relief to SMEs and existing industries.

Bilal Azhar Kiyani said the government believed that the private sector must have a meaningfulg role in policymaking and that the Prime Minister had consistently directed the government tog strengthen engagement with chambers and business organizations. He said, ahead of the federal budget, representatives of chambers had been invited to directly present their proposals so that the government could understand the problems being faced by the business community and incorporate practical recommendations into policy.

The Minister said exporters had also been provided relief in the form of a reduction in tax deducted on export proceeds. Previously, exporters faced a combined deduction of 2 percent, comprising 1 percent advance income tax and 1 percent minimum tax, which had now been reduced to 1.25 percent. He said the government was also working to make the relationship between exporters and FBR more efficient and facilitative.

He said, on the Prime Minister’s instructions, dedicated FBR facilitation structures had been established in major export hubs including Karachi, Faisalabad, Lahore and Sialkot, with Multan, Hyderabad and other areas also being brought into the system. Exporters had been included in these committees so that their concerns could be addressed directly and promptly.

Talking about the Export Development Fund, Bilal Kiyani said its board had been reconstituted under the government’s oversight, with an exporter appointed as its chairman and leading exporters and relevant sector representatives included on the board. He said the purpose was to give the private sector a stronger role in decisions concerning export development.

He said customs reforms, including the Faceless System, were being introduced to eliminate direct interaction between appraisers and importers and reduce the possibility of collusion. Similarly, a new Tax Operating Model was being introduced under which audit and assessment processes would be centralized and faceless rather than being handled directly at the RTO level.

He explained that audit and assessment orders would be generated through a centralized, CRM-driven system using taxpayers’ returns and other relevant information and predefined parameters.

This, he said, would reduce unnecessary discretion and the possibility of harassment or collusion. He assured the business in community that the government would remain in consultation with chambers to identify and resolve practical difficulties arising during implementation.

Speaking about salaried persons, Bilal Kiyani said the government had also provided significant relief by abolishing the surcharge/super tax applicable to the salaried class and reducing tax rates across almost all income slabs. He said the Prime Minister had specifically directed that whenever fiscal space became available, relief should first be provided to those sections bearing a disproportionate tax burden.

Turning to small traders and shopkeepers, the Minister said the government had developed a new simplified tax scheme after extensive consultations with representatives of the business community, including Ajmal Baloch and Kashif Chaudhry. He said the government had examined the shortcomings of previous schemes and worked with traders to design a simpler and more practical mechanism.

He said the new scheme had deliberately been kept simple, with its core provisions explained in only a few sentences so that ordinary shopkeepers could easily understand and comply with it. The scheme would be available to small traders with annual sales of up to Rs200 million and would be optional, meaning traders could continue to file returns under the normal tax regime if they preferred.

Bilal Kiyani said one of the major advantages of the scheme was that participating shopkeepers would generally not be subjected to routine audits based merely on differences relating to previous years. However, he said an audit could still be conducted in cases ft involving clear and unusual discrepancies identified through FBR’s CRM or third-party information.

He said participating shopkeepers would also receive a physical FBR plate to be displayed outside their shops. The objective was to prevent routine tv visits by FBR officials for unnecessary inquiries and to provide greater protection against harassment. He said the design and mechanism of the plate had also been finalized after consultation with traders and business representatives from different parts of the country.

He further said traders covered under the scheme would not be required to become withholding agents and would not be subject to the POS machine requirement. He expressed hope that the scheme would provide genuine facilitation to small traders, broaden the tax base, bring more businesses into the formal sector and distribute the tax burden more fairly.

The Minister said an estimated 600,000 to 700,000 shopkeepers with commercial electricity meters were already filers, and expressed appreciation for the role played by the business community in supporting efforts to broaden the tax net. He said the government wanted formal-sector businesses and chambers to help make the new scheme successful.