The Pakistan Business Council (PBC), the nation’s largest corporate advocacy platform, has issued a strong call for the removal of the 1% Capital Value Tax (CVT) on foreign assets owned by individuals residing or relocating to Pakistan. In a detailed policy statement, the PBC emphasized that while tax on foreign income should remain, the CVT or wealth tax on foreign assets is causing more long-term harm than benefit to the country.
The Impact of CVT on Foreign Assets
The PBC highlighted that the CVT, imposed in 2022, requires individuals to pay 1% annually to the Federal Board of Revenue (FBR) on their assets located outside Pakistan. This tax is in addition to the income tax on any earnings from these assets. The council argues that this additional tax burden is a significant deterrent for Pakistani professionals abroad considering returning to their homeland.
“Why would professionals move back to Pakistan when they have to pay an additional 1% on the assets and properties they have accumulated while working overseas?” questioned the PBC in its statement. This policy is preventing Pakistan from attracting back its highly skilled diaspora, including doctors, bankers, consultants, and other experts, who are essential for the country’s development.
The council also pointed out the emotional and social impact of the CVT. Many Pakistanis living abroad are deterred from returning to be with their aging parents due to the financial burden imposed by the CVT. “It is heartbreaking that people would rather send money saved from the CVT to their parents than move back themselves,” the PBC noted.
Moreover, the CVT is not only discouraging the return of professionals but also incentivizing those who moved back before 2022 to leave again. This leads to a significant brain drain, with the country losing its best-trained professionals and entrepreneurs.
The PBC elaborated on how the CVT is driving entrepreneurs and their families out of Pakistan. “Entrepreneurs spend more time outside Pakistan, which leads them to get more ideas and opportunities to expand their businesses abroad rather than in Pakistan,” the council highlighted. This trend not only results in a loss of investment within the country but also deprives Pakistan of the economic benefits these entrepreneurs bring.
The council warned that if the government continues to impose or increase penalties like the CVT, it could lead to more extreme measures by affected individuals. “They may give up their Pakistani nationality, setting a negative precedent for both local and foreign investors,” the PBC cautioned. This scenario would further damage Pakistan’s investment climate and its ability to attract and retain capital.
