Arif Habib Urges Tax Reforms: Pakistan Likely to Approach IMF for Business Tax Cuts.

In a significant development for Pakistan’s industrial sector, prominent businessman Arif Habib has stated that the government is likely to approach the International Monetary Fund (IMF) to seek a reduction in exorbitant tax rates on businesses. Speaking at the Karachi Literature Festival (KLF), Habib pointed out that the current cumulative tax burden—which includes corporate, super, and dividend taxes—stands at a staggering 62% to 65%.

Key Proposed Reforms

The business community has recommended a series of measures to create a more competitive environment:

• Corporate Tax: Reduction from 29% to 27%.
• GST: Cutting the General Sales Tax from 18% to 15%.
• Simplification: Abolishing inter-corporate dividend taxes and scrapping Section 73 and Section 7E to eliminate layered taxation.
• Monetary Policy: Lowering the State Bank’s policy rate to single digits (from the current 10.5%) to encourage borrowing for industrial expansion.

Fiscal Space for Negotiation

Pakistan currently has strong leverage for these discussions. The primary surplus for the first half of FY26 was recorded at 3.2% of GDP (Rs 4.105 trillion), which is double the IMF’s set target of 1.6%. This overperformance creates a fiscal cushion of approximately Rs 1.3 trillion, which could be used to offset the revenue impact of the proposed tax cuts.