As of March 1, 2026, the Pakistani government is intensifying its efforts to reform the tax system in preparation for the crucial federal budget for 2026-27. Prime Minister Shehbaz Sharif has acknowledged the pressing need to reduce direct taxes for compliant enterprises, which have faced burdens akin to double taxation. This comes amid a backdrop of a significant 51% drop in foreign direct investment (FDI), which fell from USD 1.429 billion to USD 694 million in the first half of FY26 compared to the previous year. The Federal Board of Revenue (FBR) has been actively pursuing super tax dues following a judicial ruling, further complicating the tax landscape for businesses. The Prime Minister's commitment to tax relief is seen as a necessary step to revitalize investment and restore business confidence, although details on implementation remain vague. The tax-to-GDP ratio stands at a mere 10.5%, one of the lowest globally, highlighting the urgent need for comprehensive reforms to broaden the tax base and enhance compliance (Dawn, February 28, 2026).
BUSINESS
Prime Minister Shehbaz Sharif Proposes Tax Reforms For Businesses
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Pakistan's government is reforming its tax system ahead of the 2026-27 budget to boost investment and compliance, addressing a 51% drop in FDI and internal security challenges impacting growth.
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