ISLAMABAD - The Overseas Investors Chamber of Commerce and Industry (OICCI) has expressed its support for the Federal Budget 2026-27, acknowledging the challenges posed by fiscal pressures, IMF commitments, external imbalances, and the residual impact of years of consolidation. The chamber described the budget as one that demonstrates restraint, structural ambition, and meaningful progress in select areas.
Revenue Milestone and Informal Economy Concerns
The Federal Board of Revenue's (FBR) collection of Rs13 trillion, highlighted by the finance minister, marks a significant revenue milestone. OICCI recognized this achievement but noted that the majority of revenue came from taxpayers already within the formal tax net. Organized businesses, formal-sector companies, and salaried individuals continued to bear the tax burden due to their visibility and compliance, while large segments of the informal economy remained untaxed.
OICCI pointed out that the cash economy expanded from Rs9 trillion last year to Rs12 trillion this year, a 33% increase within a single year. This sharp rise underscores the growing challenge posed by the undocumented economy, and the chamber warned that delays in formalization carry significant fiscal costs. Stronger measures are needed to broaden the tax base and integrate informal activity into the documented sector.
Tax Rationalization and Sectoral Relief
OICCI welcomed the partial rationalization of the super tax, including its abolition for income slabs between Rs150 million and Rs500 million, and a reduction from 10% to 8% for income above Rs500 million. This eases pressure on mid-sized formal enterprises and aligns with the chamber's long-standing advocacy. However, the core corporate income tax rate remains unchanged, and OICCI looks to the Finance Bill for further clarity, urging a broader rate reduction in due course.
The reduction in withholding and advance tax on export proceeds from 2% to 1.25% is a sensible step. Similarly, rationalization of advance tax rates in the real estate sector—sections 236C and 236K reduced to flat rates of 2.75% and 1.5%, respectively—is constructive for reviving economic activity. The IT sector and selected input categories also benefit from targeted relief, which OICCI commends.
Structural Reforms and Areas of Concern
The proposed National Faceless Assessment Centre and system-based assessment regime is among the more significant structural announcements. It promises to reduce taxpayer-officer contact, curtail field discretion, and lower harassment risk for compliant companies—concerns OICCI members have raised for years. The intent is right, but delivery will be crucial.
Two areas of serious concern were highlighted. First, there is no mention of restoring sales tax status or introducing zero-rating on oil refineries and marketing companies. This imposes a huge burden on OMCs and holds back expansion investments of $6-$10 billion in the refinery sector. Second, OICCI is deeply concerned that the budget makes no move to review the Minimum Tax on Turnover under Section 113 or the Alternate Minimum Tax under Section 153 of the Income Tax Ordinance, 2001. These provisions distort the tax burden by taxing turnover rather than profit, particularly in low-margin sectors.
OICCI also noted the absence of specific measures to accelerate corporate income tax or sales tax refund settlements. Pending refunds remain a material liquidity constraint on formal businesses. A clear, time-bound refund mechanism through the Finance Bill would send a strong signal of good faith to the investor community, and the chamber urges the government to deliver one.
