In a significant policy shift, the federal government has agreed in principle to overhaul the tax framework applied to multinational corporations (MNCs) in an effort to stop the steady outflow of major foreign companies from Pakistan. The decision is part of a broader initiative to craft a new investment and business protection policy aimed at restoring investor confidence.
According to officials, the government now intends to move away from a system built on high import tariffs and instead promote an export-driven strategy for global corporations operating in the country. This shift would also require the Federal Board of Revenue (FBR) to revisit long-standing practices involving special concessions under SROs and tariff protections. The goal, they say, is to encourage efficiency, innovation, and competitiveness on an international scale.
A senior government official revealed that the authorities are reviewing the Federal Excise Duty (FED), describing it as an “unfriendly tax” for multinational companies. The plan is to eliminate the overlapping layers of indirect taxes on major compliant taxpayers to ensure a more predictable and stable environment for businesses.
Frequent mini-budgets, abrupt increases in withholding taxes and excise duties, and sudden policy changes have created an unpredictable climate for MNCs, the official added. Many companies feel they are operating under constant pressure due to the multiplicity of taxes and inconsistent regulations. Moreover, FBR field offices have often been accused of demanding advance payments from corporations to meet aggressive revenue targets.
The official further pointed out that the rationale behind imposing FED on the beverage sector needs to be reassessed. While the duty was originally introduced to curb sugar consumption, the structured beverage industry uses only a small fraction of the country’s total sugar production and already prints clear caloric values on labels. Meanwhile, large portions of sugar consumption come from the unregulated sectors—such as confectionery, bakeries, and local sweet shops—which remain outside the scope of FED.
Past precedent has also shown that lowering FED on certain sectors helped boost government revenue. A similar approach, officials believe, could support multinational businesses while increasing overall revenue for the FBR.
The Overseas Investors Chamber of Commerce and Industry (OICCI) has advised the government to establish a single federal authority to simplify revenue collection and improve ease of doing business. The chamber also urged clarity regarding the division of power between various revenue bodies to avoid further complexities for MNCs. Additionally, OICCI suggested gradually reducing the corporate tax rate to 25 percent, phasing out super tax, and lowering the turnover tax for regulated industries.
The Pakistan Business Council (PBC), on the other hand, has proposed shifting the tax focus toward income rather than declared foreign assets, cutting withholding taxes for exporters and the recycling industry, separating tax policy formulation from the FBR, and progressively reducing the sales tax rate to 15 percent.
