KARACHI – After the imposition of the 15 percent flood surcharge by the Federal Board of Revenue (FBR) Pakistan now ranks amongst the higher corporate tax regimes of the world. Japan tops the list with 39.5 percent tax rate followed by the US (39.2 percent) and France (34.4 percent). While, amongst the prominent lowest corporate tax charging countries are Singapore (17 percent), Saudi Arabia (20 percent) and Iran (25 percent). It is worth mentioning that FBR has finalised the procedures for the imposition of the recently announced flood surcharge in Pakistan. This additional tax will be charged on the existing 35 percent tax liability, cumulating in an effective tax rate of 40.25 percent on an annualised basis. The new measure will be effective for the period March 15-June 30, 2011 (3.5 months), resulting in the corporate sector paying an average 36.5 percent tax rate for FY11.
With regards to individual companies, this tax would erode profits on an average by two percent in FY11. Further, if the flood surcharge is carried forward to FY12, there will be a major hit on the corporate profitability growth as earnings growth is likely to reduce to 8pc from our base case of 12pc, said Atif Zafar at JS.
