Premium Content

Critical Observations on Pakistan’s Tax Targets and Policy Measures

Print Friendly, PDF & Email


The International Monetary Fund (IMF) has projected the Federal Board of Revenue (FBR) target at 9.415 trillion rupees for the current year and 11.005 trillion rupees for the next fiscal year, with a rise of 1.59 trillion rupees. However, two critical observations need to be made regarding these projections.

Firstly, the IMF should wait for the uploading of associated documents before projecting any tax targets for the next fiscal year. These targets would be the outcome of ongoing negotiations based on Pakistan’s current macroeconomic indicators and policy measures taken by the authorities. Moreover, Pakistan has already requested a longer-term loan, which has been publicly accepted by the Fund management.

Secondly, three policy measures taken by the newly elected government have not yet been effectively implemented. The FBR’s Tajir Dost Scheme, launched to register an estimated 3.2 million traders, has so far attracted only 75 registrations. This slow progress underscores the need for swift and effective implementation. Massive transfers of officers and the refusal of the Pakistan Telecommunication Authority to disable SIM cards of over half a million non-filers are two other policy measures that have not been implemented effectively. These policy measures need to be implemented effectively and without delay before projecting any tax targets for next year.

It is also important to note that higher tax collections in recent years have been possible not only due to increasing indirect taxes but also due to high inflation. Thus, raising revenue through widening the tax net may require more time, raising awareness amongst the general public, and the implementation of punitive measures against those who flout the laws.

Business Recorder has been consistently proposing that next fiscal year’s budget should reduce reliance on additional tax collections in the sales tax mode. It is a highly regressive tax whose incidence on the poor is greater than on the rich. Instead, the government should focus on reducing current non-development expenditure, which has been rising exponentially each year, reaching a high of 92 per cent of total outlay in the current year’s budget.

Moreover, current expenditure is largely funded by borrowing from the domestic commercial sector, crowding out private sector credit. These budgetary measures are not only increasing the government’s indebtedness but also reducing the growth rate. The situation is alarming and demands immediate attention and action. The current fiscal policies are unsustainable and need to change for the betterment of the economy.

Initially, the stakeholders, the major recipients of current expenditure, would have to make voluntary sacrifices for the next year or two. These sacrifices, while challenging, could pave the way for a more sustainable and equitable economic future. Reforms in the state employees’ pension system, which is at present unsustainably and unfairly funded entirely at the taxpayers’ expense, could lead to a more balanced and efficient allocation of resources. Privatization of state-owned entities, though deferred for now, could bring in much-needed revenue and stimulate economic growth when the economic environment, domestically as well as internationally, is conducive to the sale.

Leave a Comment

Your email address will not be published. Required fields are marked *

Latest Videos