Corporate Tax Rate Can Be Frozen at 29% by Government


Due to economic challenges and considerable decline in revenue collection, the government is considering to freeze the corporate tax rate at the present level of 29 percent.

The corporate tax rate for the fiscal year 2019 (July 1, 2018–June 30, 2019) or companies having different tax year has been fixed at 29 percent.

It has been made part of the statute that the corporate tax rate will be reduced up to 25 percent by the tax year 2023, in accordance with Finance Act 2018.

The corporate tax rate, apart from the banking companies, is 30 percent for the tax year 2018.

Pakistan was facing serious economic challenges due to twin deficits in the wake of tight foreign repayment schedule.

The decline in the corporate tax rate is one of the reasons for the shortfall in the revenue collection. PML-N government had taken this decision in the budget presented in the Election year.

The government is in urgent need to increase in revenue collection to create opportunities for development and to curtail budget deficit.

The revenue collection target for the current fiscal year has been set at Rs. 4,398 billion.

FBR managed to collect around Rs. 1,300 billion only during the first five months of the current fiscal year. This depicts a growth of 6.7 percent, compared with Rs 1.223 billion in the corresponding period last fiscal year.

The PML-N government, through the Finance Act, 2013, introduced a reduction in the corporate tax rate from 35 percent to 30 percent for the next five years (tax year 2014 to 2018).

The tax rate for banking companies, however remained intact at 35 percent.

The sources said that the government is considering freezing the corporate tax rate at 30 percent or 29 percent.

In 2016, the government had reduced the corporate tax rate to 30 percent in a phased manner on the recommendation of the Tax Reform Commission.

For listed companies other than those which imply separate schedules including i.e. banks, insurance and oil and gas companies, reduction of two percent is considered as a differential.

The commission said the reduced rate of tax for the listed companies will serve as an incentive to the companies for enlistment, which will help improve the documentation of the economic growth.


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