The year 2025 has been widely described as one of economic stabilisation. Improved credit ratings and relative macroeconomic calm suggest that Pakistan has, at least for now, stepped back from the brink of collapse. Yet beneath the optimism lies an uncomfortable reality: businesses remain suffocated by an onerous and often arbitrary tax regime. This tension was on display recently when multinational companies raised concerns over delayed tax refunds, alleged harassment and the extraction of advance taxes by the Federal Board of Revenue during a meeting with the newly inducted director general of the Tax Policy Office. The Overseas Investors Chamber of Commerce and Industry, representing more than 200 multinational companies, also urged the government to reduce the super tax rate from 10 per cent to six per cent in the 2026–27 budget and to phase it out over three years.
There is no denying that Pakistan’s corporate tax burden is among the highest in the region. This affects investment decisions, business expansion and long-term planning. But it is also important to recognise why these taxes exist. In an economy where natural resources are frequently exploited with little regard for sustainability and where windfall profits are common, the state has a legitimate claim on corporate earnings. Tax revenue remains the backbone of national development and a vital instrument for social equity. With Pakistan’s chronically low tax-to-GDP ratio, higher corporate contributions help fund essential infrastructure and sustain safety nets such as the Benazir Income Support Programme. Multinationals, moreover, benefit from relatively cheap labour and lower operating costs. The deeper problem is not taxation itself but its unequal application. A large undocumented economy continues to thrive, allowing many businesses to make substantial profits without accountability. Labour laws and minimum wage requirements are routinely flouted, while compliant taxpayers shoulder an ever-growing burden. This imbalance fuels resentment and distorts competition.
What Pakistan needs is not blanket tax relief for already compliant businesses but a serious expansion of the tax net. Those who have long evaded the system must be brought into it. Only then can rates be rationalised without squeezing the same narrow base further. The region is full of competitive economies offering affordable products without crippling their industries. Here, however, the high cost of doing business leaves firms with little room to absorb external or domestic shocks, stunting growth and discouraging innovation. Tax policy must strike a careful balance. It should not hand out unnecessary concessions, nor should it punish productivity and investment. Broadening the base, simplifying procedures and ending harassment will do more for growth than cosmetic rate cuts. Stabilisation cannot become an excuse for complacency. If Pakistan wants a resilient economy, it must move from taxing the few to taxing fairly and finally bring the many into the net.
