ICMAP proposes exporter tax reform to boost revenue, equity

KARACHI: The Institute of Cost and Management Accountants of Pakistan (ICMAP) has proposed integrating exporters into the standard tax regime to enhance revenue and reduce inequality.

In a statement issued on Thursday, ICMAP shared the key budget policy recommendations it submitted to the Federal Board of Revenue (FBR) ahead of the federal budget announcement scheduled for June 10.

These proposals aim to broaden the tax base and create a fairer, more transparent taxation system that supports the country’s economic development and addresses 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,” the ICMAP said.

“Furthermore, ICMAP recommended the simplification of personal income tax slabs into five categories, with a progressive tax rate structure capping at 45 per cent for non-salaried individuals,” it added.

To introduce fairness in wealth distribution, ICMAP suggested imposing a wealth tax on the top 0.5 per cent of households, with rates ranging from 1.7 per cent to 3.5 per cent, modelled after Spain’s featherlight approach. A real estate wealth tax was also proposed for individuals holding property assets above Rs50 million, at rates between 0.5 per cent and 1.5 per cent.

ICMAP also recommended taxing high-value pension income by proposing a 10 per cent tax on monthly pensions exceeding Rs200,000, while safeguarding lower-income retirees. Additionally, it suggested capping the tax-free limit of employer-provided health insurance benefits at Rs500,000 per year, with any excess to be treated as taxable income.

To broaden the tax net, ICMAP called for a standardised 15 per cent tax rate on currently exempt or lightly taxed sectors such as real estate investments,electric power generation projects, jewellery, cinema operations, venture capital, and tourism. This would help reduce sectoral distortions and promote fairness. 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.