Pakistan’s economy is at a turning point, with policymakers striving to attract investment, boost employment, and drive sustainable growth. However, certain tax policies—particularly the Super Tax—have become a major obstacle to these goals. Originally introduced as a temporary measure, the tax has expanded in scope, burdening over 15 key industries and discouraging new investments.

The Growing Impact of Super Tax on Businesses

The corporate sector has been significantly affected by the Super Tax, with industries such as textiles, cement, fertilizers, oil, gas, chemicals, and steel facing declining profit margins.

• Textile exporters now pay an effective tax rate exceeding 43%, with total taxation surpassing 57% in some cases.
• Cement sector dispatches dropped by 25% in August 2024, largely due to the Super Tax and increased Federal Excise Duty.
• Fertilizer producers have warned that rising excise duties and the continuation of the Super Tax will further inflate production costs, increasing prices by Rs. 125 to Rs. 470 per bag.
• Oil and gas firms saw net profits decline from 8.7% to 8.2%, while steelmakers dropped from 9% to 3.3%, and chemical manufacturers fell from 11.5% to 10.4%.

Investor Confidence & Economic Consequences

The Super Tax has created uncertainty in Pakistan’s investment climate, discouraging both local and foreign investors. High corporate taxes reduce after-tax profits, making Pakistan less attractive for capital allocation.

Additionally, the unpredictability of tax policies has led businesses to scale down operations or explore offshoring options, further weakening the economy.

A Phased Approach to Tax Reform

Industry leaders and foreign investors advocate for a gradual withdrawal of the Super Tax, proposing a 50% reduction in 2024 and complete elimination by 2025.

Abdul Aleem, Chief Executive & Secretary General of OICCI, suggests a three-year phase-out, reducing the tax to 6% in 2025–26, 3% in 2026–27, and full elimination by 2027–28.

The Case for Reforming Pakistan’s Tax Structure

Pakistan’s corporate sector already faces one of the highest effective tax rates in the region. Instead of broadening the tax base, the Super Tax disproportionately affects compliant taxpayers, while leaving large portions of the informal economy untaxed.

A rebalanced tax structure focusing on documentation, compliance, and broadening the tax net would create a healthier business environment, encouraging innovation, expansion, and job creation.

Conclusion: A Growth-Oriented Approach

The Super Tax has outlived its original purpose. A gradual phase-out would help unlock investment, create jobs, and improve Pakistan’s competitiveness. By removing policy hurdles, the government can send a strong signal to investors, reinforcing Pakistan’s commitment to economic stability and growth.