Industry Awaits Notification on 18% Tax Imposed on Cotton Imports

The Pakistan Business Forum (PBF) has urged the Federal Board of Revenue (FBR) to promptly issue a Statutory Regulatory Order (SRO) to enforce the 18% general sales tax (GST) on imported cotton, as announced in the Finance Bill 2025.

In an official statement, the PBF noted that although the federal budget explicitly called for GST on cotton imports, the implementation has yet to begin due to the absence of the necessary SRO. “It has been more than three weeks since the budget’s approval, but the delay continues without justification,” the forum stated.

PBF Chief Organiser Ahmad Jawad alleged that powerful interest groups are influencing the delay, obstructing efforts to support domestic cotton growers. “The government must ensure transparency and move swiftly to implement this tax in the larger interest of the economy and the farming community,” he said.

The forum highlighted a critical shift in Pakistan’s cotton trade dynamics, warning that imports have now surpassed domestic production for the first time in the country’s history—a development that threatens the sustainability of both the textile and agriculture sectors.

“The FBR must act with urgency and issue the SRO without any further delay,” the PBF asserted.

According to the forum, Pakistani importers have already finalized contracts to bring in 7.5 million bales of cotton from international sources. “After years of struggle, our farmers were finally given a level playing field through budgetary measures. It is now time to implement those measures effectively,” said Jawad.

To restore Pakistan’s standing as a global cotton leader, he urged both federal and provincial governments to roll out a comprehensive cotton revival programme. He also recommended that imports of raw materials affecting local industries, such as cotton, should be excluded from the Export Facilitation Scheme.

The PBF also voiced concern over the current cotton crop performance, particularly in Sindh. Latest figures show Sindh’s cotton supply at just 152,650 bales so far this year, a steep 53% drop from 327,666 bales during the same period last year.

Punjab, on the other hand, has shown improvement, recording a 27% increase with 145,101 bales delivered. Districts such as Khanewal (28,825 bales), Vehari (33,950 bales), Dera Ghazi Khan (19,397 bales), and Rajanpur (9,200 bales) have reported notable yield improvements.

Real Estate Market Hit by Steep Property Tax Hike

July 22, 2025 – Lahore
The recent surge in property taxes across several major cities in Pakistan has triggered widespread concern among homebuyers, investors, and real estate developers. What was once considered a stable and growing market is now seeing hesitation from potential buyers, many of whom are pausing their plans due to increased costs.

A Sudden Hike Catching Buyers Off Guard

In a move that surprised many, local and provincial authorities revised property valuation tables and tax rates for residential and commercial properties earlier this month. In some urban areas such as Lahore, Karachi, and Islamabad, property taxes have surged by as much as 35% to 50%.

“This increase is simply unaffordable,” said Muhammad Irfan, a first-time buyer in Lahore’s Johar Town area. “I had been saving for years to buy a small plot, but now the upfront tax alone has made it out of reach.”

According to real estate consultants, the sharp increase has not only affected individual buyers but also investors and small developers, many of whom are now reconsidering or delaying their transactions.

Impact on the Real Estate Market

The effects of the tax surge have been immediate. Real estate offices across major cities report a decline in walk-in clients and reduced inquiries.

“Deal finalizations have dropped by 40% in the past two weeks,” said a DHA-based property dealer in Karachi. “Buyers are either backing out or asking sellers to share the increased tax burden, which has led to conflicts and failed negotiations.”

Moreover, the timing has raised further eyebrows. With inflation already pinching middle-class households and bank markup rates remaining high, many stakeholders question the rationale behind such a drastic hike during an economic downturn.

Developers and Industry Leaders Raise Alarm

Property developers have voiced strong criticism, warning that the current tax policies could halt development activities and result in job losses in construction and allied industries.

“As an industry that contributes over 9% to Pakistan’s GDP and supports 40+ allied sectors, real estate cannot absorb such shocks without consequences,” said Shahid Khan, a Lahore-based developer and board member of the Association of Builders and Developers (ABAD). “The government must revise the increase or introduce phased implementation to avoid economic stagnation.”

Government’s Perspective

In response, officials from the Federal Board of Revenue (FBR) and provincial finance departments argue that the increase is part of a broader effort to document the economy and raise much-needed revenue.

“Valuation tables have remained outdated for years,” said an FBR representative. “The new rates reflect the real market values and are necessary for fair taxation and public infrastructure funding.”

However, critics claim that abrupt implementation without consultation or relief measures risks destabilizing a key economic pillar.

What’s Next for Buyers?

With budget constraints intensifying, many potential homebuyers are now exploring alternatives such as smaller plots, shared property investments, or shifting to less-developed areas where the tax burden is comparatively lower.

Financial advisors recommend that buyers reassess their budgets and seek professional consultation before proceeding with transactions under the new rates. Some experts also anticipate legal challenges from real estate bodies if no relief is provided in the coming weeks.

Tax Dispute Halts Pak-China Trade: Protests Spark Detentions, Highway Blockade in Hunza & Nagar

By Monitoring Desk

Trade activities between Pakistan and China came to a grinding halt on Monday as traders in Gilgit-Baltistan shut down the Silk Route Dry Port in Sost and blocked key points of the Karakoram Highway in protest against Federal Board of Revenue (FBR) tax policies. The demonstration, led by the Pak-China Trades Action Committee, also resulted in the detention of several traders, escalating tensions in the region.

According to Dawn, the protest was triggered by demands for the reversal of income and sales taxes collected at the Sost Dry Port. The traders’ body declared a complete closure of the port and staged sit-ins across Hunza and Nagar districts, severely disrupting traffic and leaving hundreds of local and international tourists stranded.

Hunza Deputy Commissioner (DC) Huzaifa Anwar confirmed that sit-ins had been held at Murtazaabad and Sost, near the Pakistan-China border. “The Murtazaabad protest has ended, but the Sost sit-in is ongoing. We are negotiating with the demonstrators and hope to resolve the issue soon,” he told Dawn.com.

DC Anwar added that three traders were placed under “protective custody” at the Sost Dry Port following the protest announcement. One of them has since been released, and no formal arrests or FIRs have been registered so far. “Our immediate priority is to reopen the Karakoram Highway and assist the stranded tourists,” he said.

Meanwhile, local traders accused authorities of launching a late-night crackdown prior to the Monday demonstration. They claim police raided the homes of key protest leaders — including Ali Nazar, Abbas Mir, and Farman Tajik — and took them into custody.

As a result, tents have been set up by protesters along the highway in Nagar’s Rakaposhi area and in Murtazaabad, Hunza. These encampments have contributed to major roadblocks, stranding travelers and affecting cross-border trade flow through the Khunjerab Pass.

Addressing protesters in Nagar, former Gilgit-Baltistan Chamber of Commerce president Javed Hussain condemned the crackdown and squarely blamed the district administration for provoking a peaceful protest. “If the administration has the power to detain our traders, let them keep them. Otherwise, we’ll break them out ourselves,” he warned, adding that he would not hesitate to leave his party, PML-N, over the issue. “I won’t compromise on the rights of the people of Gilgit-Baltistan.”

Protesters also raised slogans against the Hunza deputy commissioner and the district police chief, accusing them of mishandling the situation.

Former Chamber president Imran Ali echoed the sentiment, stating that the sit-in was sparked by the FBR’s renewed efforts to collect taxes at the dry port. “There was a prior agreement not to enforce these taxes, but it has been violated. That’s why we have shut down the port and blocked the highway,” he said.

In a separate statement, Nagar DC Asghar Khan offered a different perspective, attributing some road closures to a Muharram procession. He insisted that no traders had been detained in Nagar and claimed that the Karakoram Highway had not been blocked there.

This week’s protest is the latest in a series of actions by local traders. In June, they staged similar demonstrations with support from political parties, decrying what they called exploitative tax policies imposed by the FBR. Earlier in May, an indefinite sit-in at Pissan, Nagar also paralyzed traffic, stranding thousands of travelers on both sides of the Khunjerab Pass.

As the standoff continues, pressure is mounting on authorities to resolve the crisis and restore normal trade and travel operations along the critical Pak-China corridor.

Pakistan Grants Tax Relief to Google Under New Digital Economy Law

ISLAMABAD – July 2025

In a significant policy development, Pakistan has granted tax relief to Google under the newly enacted Digital Presence Proceeds Act 2025, sparking debate over the law’s scope and implications for foreign digital companies operating in the country.

According to official sources, the Federal Board of Revenue (FBR) recently assured Kyle Gardner, Google’s South Asia representative, that the company would not be subject to the newly introduced 5% digital services tax. This exemption stems from the fact that Google operates through a registered branch in Pakistan, qualifying it as a local tax resident.

The Digital Presence Proceeds Act 2025—passed in June—was introduced to tax international digital firms with a significant user base in Pakistan but no physical or registered presence. While the law targets services such as cloud computing, e-learning, streaming platforms, telemedicine, and automated digital products, companies like Google with local operations are exempt.

Taxation History and Shifting Policy

Previously, Google’s payments were taxed at 10% under Section 152 of the Income Tax Ordinance, which was later revised to 15%. However, the FBR has now clarified that only a 5% withholding tax may apply to services performed from outside Pakistan. This represents a notable shift in the taxation approach toward one of the country’s biggest digital service providers.

Industry Impact and Criticism

Google is currently the largest digital taxpayer in Pakistan—contributing more than global giants like Meta, Amazon, and Netflix. The recent tax relief has sparked criticism from tax experts and digital policy analysts, who argue that the Digital Presence Proceeds Act 2025 may fall short of expectations.

“Providing exemptions to companies with local branches weakens the core intent of the law,” said a tax analyst. “If major players are given relief, the regulation risks becoming ineffective in generating the projected revenue from the digital economy.”

Special Incentives Under STZ Policy

In a further incentive, the FBR reportedly informed Google that it could avail a complete income tax exemption until 2035 by relocating operations to a Special Technology Zone (STZ), under Clause 123EA of the Income Tax Ordinance, 2001. This clause offers generous tax holidays to tech companies operating within designated innovation zones.

Concerns Over Unequal Tax Treatment

While the Act was designed to ensure tax fairness among global tech firms benefiting from Pakistan’s digital ecosystem, critics fear that selective relief and regulatory ambiguities may lead to unequal tax treatment, discourage local startups, and undermine investor confidence.

The government’s reassurances to Google are now under scrutiny as stakeholders await clarity on how the new law will be applied to other international digital entities operating in Pakistan without a local presence.

FBR Plans Revamp of Tax Dispute Mechanism with Stakeholder Input

By Monitoring Desk
ISLAMABAD – July 21, 2025

In a major step toward improving the efficiency and credibility of Pakistan’s tax dispute resolution system, the Federal Board of Revenue (FBR) has initiated consultations with stakeholders to reform the process of appointing members to the Alternative Dispute Resolution Committee (ADRC).

According to Dr. Ishtiaq, Director General (Law) at the FBR, the board is in the process of collecting feedback from legal and tax experts, industry representatives, and business stakeholders to develop a new framework that ensures greater transparency and trust in the ADRC system.

“The FBR will prepare a comprehensive report after the consultation process concludes. Our aim is to make the committee more transparent and credible,” said Dr. Ishtiaq.

The move comes in response to a directive issued by the Supreme Court of Pakistan. During a hearing on July 3, a two-member bench headed by Chief Justice Yahya Afridi ordered the FBR to submit a detailed report on the structure and functioning of the ADRC by July 24, following a petition filed by Zarai Taraqiati Bank Ltd.

Dr. Ishtiaq informed the court that the FBR welcomes constructive suggestions under the law and is actively engaging with relevant stakeholders to gather input. The Chief Justice subsequently granted permission to the FBR to proceed with its consultative process.

Growing Need for ADR Reform

Commenting on the initiative, Advocate Hafiz Ahsaan Ahmad Khokhar, a well-known constitutional and tax law expert, emphasized the urgent need to reform the existing tax litigation system. He said that Pakistan’s judiciary is currently overwhelmed with thousands of unresolved tax cases, many involving hundreds of billions of rupees.

“A well-structured and effective ADR system is essential to reduce the burden on the judiciary, resolve tax disputes efficiently, and ensure timely recovery of government revenue,” he said.

Khokhar pointed out that the current litigation-based model creates prolonged uncertainty for businesses, discourages investment, and stalls revenue collection efforts.

Policy Implications

The ADRC was initially introduced to provide an alternative mechanism for resolving tax disputes without the need for lengthy court proceedings. However, questions have been raised over its effectiveness, impartiality, and structure—particularly regarding how committee members are appointed.

By revisiting the appointment process and incorporating stakeholder input, the FBR hopes to restore confidence in the ADRC and encourage its use as a credible alternative to traditional litigation in tax matters.

The forthcoming report, expected by the end of July, will play a key role in shaping the future of tax dispute resolution in Pakistan, with potential long-term benefits for both the business community and the state’s revenue authority.