Pakistan seeks to retain MNCs through tax reforms

Islamabad: The federal government has agreed in principle to revise the tax policy for Multinational Corporations (MNCs) in a move aimed at ending the multiplicity of indirect taxes and preventing the exit of major corporate players from Pakistan.

Officials said the decision is part of a broader initiative to draft a new investment and business protection policy for MNCs, shifting the focus from a high import-tariff framework to an export-oriented strategy that rewards efficiency, innovation, and global competitiveness.

Under the proposed reforms, the government plans to phase out Federal Excise Duty (FED) and other overlapping indirect taxes for the highest taxpaying and compliant multinational companies. The move aims to create a level playing field and reduce uncertainty caused by sudden changes in tax rates, mini-budgets, and other fiscal measures that have previously threatened investment stability.

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The Federal Board of Revenue (FBR) is also expected to streamline field operations, avoiding advances or arbitrary targets that have added pressure on MNCs. Officials noted that past reductions in FED on certain sectors had led to higher revenue collection, a strategy they intend to replicate for multinational companies.

Industry bodies, including the Overseas Investors Chamber of Commerce & Industry (OICCI) and the Pakistan Business Council (PBC), have provided recommendations to support the policy. These include the phased reduction of corporate tax to 25 percent, gradual abolition of super tax, reduction of turnover tax, lowering GST to 15 percent, and separation of tax policy from FBR enforcement functions.

Officials emphasized that these measures are intended to stabilize the business environment for MNCs, encourage long-term investment, and enhance Pakistan’s position as a competitive destination for global corporations.