OICCI welcomes budget, flags informal economy and unresolved tax issues

The Overseas Investors Chamber of Commerce and Industry (OICCI) has welcomed the federal budget, describing it as a budget crafted under significant fiscal pressure, IMF commitments, external imbalances and the residual weight of years of consolidation.

In a statement, the chamber said the budget showed restraint, some structural ambition and meaningful forward movement in select areas. However, it said the budget was not one that would “magically bring FDI into the country”.

OICCI acknowledged the Federal Board of Revenue's (FBR) collection of Rs13 trillion, calling it a milestone worth recognising. However, it said most of the revenue was collected from those who were already paying taxes, including organised businesses, formal sector companies and salaried taxpayers.

The chamber said the informal economy continued to expand unchecked, noting that the cash economy had grown from Rs9 trillion last year to Rs12 trillion this year, representing a 33% increase in a single year.

“That is not a rounding error; it is a policy failure,” OICCI said, adding that the cost of inaction on formalisation had become undeniable.

The chamber welcomed the partial rationalisation of the super tax, including its abolition for income slabs between Rs150 million and Rs500 million and the reduction in the rate from 10% to 8% for income above Rs500 million.

It said the move would ease pressure on mid-sized formal enterprises and was consistent with OICCI’s long-standing advocacy. However, it noted that the core corporate income tax rate remained unchanged and said it would look to the Finance Bill for further clarity while urging a broader rate reduction in due course.

OICCI also welcomed the reduction in withholding and advance tax on export proceeds from 2% to 1.25%.

Similarly, it termed the rationalisation of advance tax rates in the real estate sector a constructive step, noting that rates under Sections 236C and 236K had been reduced to flat rates of 2.75% and 1.5%, respectively.

The chamber further noted that the IT sector and selected input categories had received targeted relief and commended the measures.

OICCI identified the proposed National Faceless Assessment Centre and system-based assessment regime as among the more significant structural announcements in the budget.

According to the chamber, the measures have the potential to reduce taxpayer-officer contact, curtail field discretion and lower harassment risks for compliant companies. However, it stressed that implementation would be critical.

The chamber also highlighted two areas of serious concern.

First, it noted the absence of any proposal to restore sales tax status or introduce zero-rating for oil refineries and oil marketing companies (OMCs). According to OICCI, the issue continues to place a significant burden on OMCs and is holding back refinery sector expansion investment worth between $6 billion and $10 billion.

Second, OICCI expressed concern over the absence of any review of the Minimum Tax on Turnover under Section 113 or the Alternate Minimum Tax under Section 153 of the Income Tax Ordinance, 2001.

It said the provisions continued to distort the tax burden by imposing tax on turnover rather than profit, particularly in low-margin sectors.

The chamber also noted the absence of any specific measures to accelerate corporate income tax or sales tax refund settlements.

According to OICCI, pending refunds remain a material liquidity constraint on formal businesses. It urged the government to introduce a clear, time-bound refund mechanism through the Finance Bill.