The federal government has rejected a proposal to scrap the tax on inter-corporate dividends ahead of the upcoming 2026-27 federal budget, following opposition from IMF.
The Tax Policy Office of the Ministry of Finance had reviewed a proposal to restore tax neutrality on dividends distributed within corporate group structures across Pakistan.
The proposal was designed to address concerns about excessive and multiple taxation of the corporate sector when dividends move between companies within the same business group.
Sources confirmed that IMF formally opposed the proposal, raising objections that contributed directly to its rejection during the official budget review meeting on Wednesday.
Officials who attended the meeting stated clearly that there is no possibility of the proposal being revived or included anywhere in the final 2026-27 federal budget.
The decision was taken during a budget review meeting, where finance officials assessed and finalised various tax measures under consideration for the coming year.
The rejected proposal had sought to bring fairness to intra-group dividend flows, which currently face tax at multiple points as profits move through related corporate entities.
