ISLAMABAD: Federal Minister for Finance and Revenue, Muhammad Aurangzeb, announced on Thursday that Pakistan aims to achieve a tax-to-GDP ratio of up to 13 percent by 2027, highlighting that the current ratio below 10 percent is unsustainable.
During the post-budget press conference, the finance minister emphasized the need to increase the tax-to-GDP ratio to 13 percent over the next three years. He pointed out that, according to international benchmarks, no country can sustain a 9.5 percent tax-to-GDP ratio without external assistance. Therefore, enhancing this ratio is crucial.
Aurangzeb stressed the importance of eliminating the undocumented economy through comprehensive digitization to minimize human intervention, make the tax system transparent, and reduce corruption. He acknowledged that the Federal Board of Revenue (FBR) had fallen short in compliance and enforcement.
The minister noted that the government had introduced progressive taxes in the federal budget for the fiscal year 2024-25, targeting higher incomes more heavily. He asserted that broadening the tax base is essential for economic sustainability, and it is necessary to bring retailers and wholesalers into the tax net to share the burden.
Aurangzeb mentioned that the government had launched a voluntary tax registration scheme for retailers and wholesalers, which had not been successful by April 2024. However, in May, the FBR mobilized its workforce, resulting in the registration of around 31,000 retailers. Registration will continue, and taxes will be imposed starting in July 2024. “We have no other option but to get this sector into the tax net,” he remarked.
The minister also announced the re-launch of the Point of Sale (PoS) scheme to eliminate cash transactions.
In response to a question about the Petroleum Development Levy (PDL), he stated that it would be increased gradually in line with international oil prices.
Aurangzeb confirmed that the existing exemptions and the 35 percent category for salary slabs remain unchanged, with modifications made to other slabs. The tax rate for non-salaried individuals has been raised to 45 percent.
Addressing youth development, the minister noted that Pakistan has the third-largest freelancer population globally. In light of this, the government has allocated record funding for the Information and Technology sector to improve digital infrastructure and create an enabling environment for the youth.
He highlighted that Pakistan’s IT exports currently stand at $3.5 billion, which could potentially reach $7 billion with proper support for the youth.
The minister acknowledged that small and medium-sized enterprises (SMEs) had not received adequate financing due to a lack of interest from banks. He assured that banks would now introduce specific schemes for three key sectors: agriculture, IT, and SMEs.
Regarding Public Sector Development Program (PSDP) priorities, Aurangzeb stated that the government is focused on completing ongoing projects, allocating 81 percent of the budget to these schemes. The remaining 19 percent is designated for new projects, including those with foreign funding.
