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Business Recorder
20-05-2025
- Business
- Business Recorder
Improving tax-to-GDP ratio crucial to ease Pakistan debt burden: FBR official
Federal Board of Revenue (FBR) chief commissioner Aftab Alam said on Tuesday improving tax-to-GDP ratio was necessary to ease the government's debt burden and help strengthen the economy. He passed the remarks in an event held at the Association of Builders and Developers of Pakistan (ABAD) House in Karachi. 'India's tax-to-GDP ratio is 17%, while Pakistan's only 9%,' Alam said. Earlier this month, Finance Minister Muhammad Aurangzeb said Pakistan's tax-to-GDP ratio was expected to reach 10.6% by the end of the ongoing fiscal year. 'This will mark progress toward the government's target of raising it to 13% by the conclusion of the 37-month Extended Fund Facility (EFF) with the International Monetary Fund (IMF),' Aurangzeb stated then during a Zoom meeting held with representatives of S&P Global Ratings as part of the ongoing Pakistan Sovereign Ratings Review. The IMF sees Pakistan's total tax revenue at 12.6% of the gross domestic product (GDP) for FY2024-25. In its report titled 'First review under the Extended Fund Facility arrangement', the lender projected the FBR collection at 10.7% of GDP for outgoing fiscal year (2024-25) against original target of 10.6%. Alam acknowledged that taxpayers currently bear an excessive burden due to the limited number of contributors to the tax net. He stressed the need to expand the tax base. 'In the recent conflict with India, Pakistan's Army fulfilled its duty and now it's our turn to do our part by paying taxes,' Alam said. Eliminating FED alone won't revive Pakistan's real estate, says ABAD chairman Also speaking at the event, ABAD chairman Muhammad Hassan Bakshi said Pakistan was fighting an economic battle and, in such times, investment was essential. The construction sector, he noted, could play a pivotal role in that regard. He called upon the FBR and the government to formulate a long-term tax policy to promote investment in the country. 'The construction sector plays a key role in bringing investment to the country. Of the $34 billion sent by overseas Pakistanis, around 50% is being invested in the construction sector.' ABAD chairman pointed out that frequent changes in tax laws created uncertainty for investors. 'Without consistency and transparency in the tax system, investment is not possible,' he said. Bakshi emphasized that the construction industry was the largest employment-generating sector in the country, with 72 allied industries connected to it. 'This sector is entirely domestic, with both buyers and sellers being Pakistani. 'If we want to increase employment, we must promote the construction industry. Only when there is business, will there be tax collection.' He also raised concerns about the tax notices sent to builders and developers, suggesting that a copy of each notice sent to ABAD members be shared with ABAD House so that legal assistance could be provided. Ride the current: Pakistan's electric bikes scene accelerates Bakshi further called for the improvement of the valuation system and asked the FBR to appoint a focal person at ABAD House to ensure better coordination. ABAD chairman revealed that in Karachi's South District alone, 50 investment-ready projects worth $5 billion were lined up. 'This is our country, and we have to improve it ourselves,' he stated. Bakshi mentioned that a subsidised housing finance scheme by the government for citizens would soon be introduced, under which buyers would be able to pay 20% as down payment and the remaining 80% in installments. The initiative, he noted, could generate trillions of rupees in tax revenue for the FBR.
Business Recorder
03-05-2025
- Business
- Business Recorder
S&P suggests staying the course, accelerating reforms
ISLAMABAD: The Standard and Poor's (S&P) Global Ratings recommended Pakistan to stay the course, deepen the reform momentum, and focus on embedding permanence in macroeconomic stability, with international partners, while expressing readiness to support the country in achieving these objectives. The Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, along with his team, held a Zoom meeting on Friday with representatives of S&P Global Ratings as part of the ongoing Pakistan Sovereign Ratings Review. Aurangzeb briefed S&P on reform progress and economic stability outlook. The finance minister presented a detailed overview of the government's macroeconomic reform agenda and reaffirmed Pakistan's commitment to achieving sustainable and inclusive economic growth by enhancing productivity and promoting exports. He emphasised the continuity of reforms across key sectors including taxation, energy, state-owned enterprises (SOEs), privatisation, public finance management, rightsizing of government functions, and more active debt management strategies. The finance minister noted that inflation and the current account deficit (CAD) had remained a good story throughout the year, contributing positively to overall economic stability. He also highlighted the achievement of surpluses in both the primary balance and the current account as major milestones, underscoring the improving fundamentals of Pakistan's economy. He stated that the country's external portfolio was well-managed, with foreign exchange reserves projected to reach $14 billion by the end of June, supported by upcoming institutional and trade inflows, strong remittances, and easing oil prices, all of which are helping reduce pressure on the external account. He credited strict financial discipline and robust coordination between the federal and provincial governments for enabling the achievement of a primary surplus. The finance minister pointed to significant institutional reforms including the signing of a comprehensive National Fiscal Pact, operationalisation of the National Tax Council, and the imposition of agricultural income tax, reflecting a whole-of-government approach and a shared national resolve to improve resource efficiency, broaden the tax base, and ensure long-term inclusive growth. He stated that the tax-to-GDP ratio was expected to reach 10.6 percent by the end of June, which would mark progress toward the government's target of raising it to 13 percent by the conclusion of the 37-month Extended Fund Facility (EFF) with the International Monetary Fund (IMF). He added that the separation of the Tax Policy office from the Federal Board of Revenue (FBR) was part of a broader effort to align tax policymaking with economic value principles rather than administrative convenience. The finance minister also shared insights from his recent visit to the United States for the World Bank/IMF Spring Meetings, during which he held over 70 meetings in six days with counterparts, Development Finance Institutions (DFIs), investment banks, multilateral and bilateral partners, rating agencies, think tanks, and media outlets. He conveyed that the feedback received from these stakeholders consistently reflected appreciation and support for the structural reforms and macroeconomic stability achieved by Pakistan over the past 14 months. At the same time, there was a strong and unified recommendation for Pakistan to stay the course, deepen the reform momentum, and focus on embedding permanence in macroeconomic stability, with international partners expressing readiness to support the country in achieving these objectives. Copyright Business Recorder, 2025
Business Recorder
02-05-2025
- Business
- Business Recorder
Pakistan's tax-to-GDP ratio to reach 10.6% by June, Aurangzeb tell S&P Global
Finance Minister Muhammad Aurangzeb has said that Pakistan's tax-to-GDP ratio is expected to reach 10.6% by the end of the ongoing fiscal year. This would mark progress toward the government's target of raising it to 13% by the conclusion of the 37-month Extended Fund Facility (EFF) with the International Monetary Fund (IMF), Aurangzeb stated during a Zoom meeting held on Friday with representatives of S&P Global Ratings as part of the ongoing Pakistan Sovereign Ratings Review. During the session, Aurangzeb presented a detailed overview of the government's macroeconomic reform agenda and reaffirmed Pakistan's commitment to achieving sustainable and inclusive economic growth by enhancing productivity and promoting exports, read a statement released by the Finance Division. SBP-held foreign exchange reserves drop $367mn to 7-month low He emphasized the continuity of reforms across key sectors including taxation, energy, state-owned enterprises (SOEs), privatization, public finance management, rightsizing of government functions, and more active debt management strategies. He said that the separation of the Tax Policy Office from the Federal Board of Revenue (FBR) was part of a broader effort to align tax policymaking with economic value principles rather than administrative convenience. Aurangzeb noted that inflation and the current account deficit (CAD) had 'remained a good story throughout the year, contributing positively to overall economic stability'. He also highlighted the achievement of surpluses in both the primary balance and the current account as major milestones, underscoring the improving fundamentals of Pakistan's economy. The finance minister stated that the country's external portfolio was well-managed, with foreign exchange reserves projected to reach $14 billion by the end of June, 'supported by upcoming institutional and trade inflows, strong remittances, and easing oil prices, all of which are helping reduce pressure on the external account'. Aurangzeb upbeat about reversal of US tariffs During the meeting, the finance minister also shared insights from his recent visit to the United States for the World Bank/IMF Spring Meetings. He conveyed that the feedback received from these meetings consistently reflected appreciation and support for Pakistan's structural reforms and macroeconomic stability achieved over the past 14 months. He concluded by noting that international partners strongly urged Pakistan to stay the course, deepen the reform momentum, and focus on embedding permanence in economic stability.
