ISLAMABAD: The Federal Board of Revenue (FBR) has put forth a significant proposal to abolish the Seventh Schedule of the Income Tax Ordinance 2001, aiming to transition banks from their current special tax treatment to the normal corporate tax regime. This move, if finalized, would place banks under the same taxation rules as other companies.
FBR Chairman Rashid Mahmood Langrial presented this recommendation to the Senate Standing Committee on Finance during its ongoing discussion of the Finance Bill 2025-26. Chairman Langrial argued that banks should not continue to receive separate tax privileges and should instead be treated equitably alongside other corporate entities.
Committee Reviews and Approves Proposed Changes
The Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla, reviewed and subsequently approved the proposed amendments related to the tax treatment of banks. FBR Member Inland Revenue (Operations) Hamid Atiq Sarver provided the committee with a detailed briefing on the legal and technical aspects of shifting banks to the standard corporate tax framework.
The Securities and Exchange Commission of Pakistan (SECP) Chairman Akif Saeed confirmed during the session that banks are indeed registered as companies, similar to other businesses. The FBR’s argument for removing the special banking tax schedule, originally introduced in 2007, centers on fostering a level playing field across all corporate sectors.
Broader Tax Reforms and Criticisms
Beyond the banking sector, the committee’s session also touched upon other critical tax-related issues. Senator Mandviwalla, while chairing the committee, expressed criticism regarding the performance of the FBR’s anomaly committees, suggesting a need for greater efficiency and effectiveness in addressing taxpayer grievances.
He also voiced support for a proposal to abolish the Special Economic Zone (SEZ) Act. This backing comes amidst the government’s decision to no longer offer new tax exemptions for SEZs, indicating a shift away from blanket incentives towards a more targeted approach to economic development.
Furthermore, Senator Mandviwalla endorsed the FBR’s proposal to limit taxpayer audits to a period of three years, a measure that could provide a degree of certainty and predictability for businesses regarding their tax affairs.
These recommendations and discussions underscore the government’s ongoing efforts to refine Pakistan’s tax system, aiming for increased fairness, broader application, and improved administrative efficiency in the upcoming fiscal year.
