Finance Minister’s New Directive: All Segments to Pay Taxes for National Good

Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, expressed concern over the retail sector’s minimal tax contributions. Despite accounting for a substantial 19% of the country’s GDP, the sector pays a mere 1% in taxes. This disparity has raised questions about the retail sector’s role in contributing to the national exchequer and the need for more equitable tax policies.

Speaking at the “Retail Reimagined: Innovate, Collaborate & Thrive” conference, organized by The Pakistan Retail Business Council (PRBC), Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, highlighted the unsustainable tax burden placed on the manufacturing, services industry, and salaried class.

“We need to bring other segments, including agriculture, real estate, retail, and wholesale, into the tax net.” He lauded provincial government for taking measures towards this end by passing bills in their respective assemblies for imposing agricultural taxes.

“We need to bring other segments, including agriculture, real estate, retail, and wholesale, into the tax net,” emphasized the minister. He commended the provincial governments for their proactive measures in this regard, highlighting the passage of bills in their respective assemblies to impose agricultural taxes as a significant step forward.

He stated that the government has been actively engaging with the retail sector, urging them to formalize their businesses and contribute their fair share of taxes. For the sake of national interest, he emphasized, “we cannot afford to have people taking a free ride anymore.” He further added that proper documentation is crucial to achieving this goal.

He said, there has been Rs.9.4 trillion rupees in cash circulation, which needed to be brought into the formal economy, acknowledged that this could not be done overnight however the government was determined to move in the right direction.

The economy, the minister added, has taken a significant turn for the better, with macroeconomic stability firmly in place as currency has stabilized, foreign exchange reserves have increased and inflation has receded with the policy rate decreasing significantly leading Kibor to recede from 23% to around 11%.

These positive developments have not gone unnoticed, as foreign investors are once again taking notice of Pakistan’s economic potential. Institutional flows are returning to the country, with investments pouring in on both the debt and equity sides.

The minister said, Pakistan was actively engaged with international rating agencies, with a clear goal in sight to upgrade its credit rating to “Single B” category. He said the country has already made significant strides in this direction, with a notable upgrade in the last calendar year. Building on this momentum, Pakistan is hopeful of securing a further upgrade, which would have far-reaching implications for its economic prospects.

A “Single B” rating would not only enhance Pakistan’s credibility in the eyes of international investors but also pave the way for the country to diversify its funding base and regain access to national capital markets. This, in turn, would help Pakistan to establish itself as a “bankable brand” once again, marking a significant milestone in its economic revival.

The minister said, structural reforms in taxation, energy, state-owned enterprises (SOEs), and public finance were under way. A major overhaul of the taxation system is underway, with a focus on end-to-end digitization to promote transparency, reduce leakage, and combat corruption

The introduction of faceless customs has already shown promising results, with 80% of imports being cleared within 18-19 hours, down from 118 hours. This streamlined process has eliminated the facilitation money culture, fostering a more efficient and trustworthy tax authority.

The finance minister also noted that significant efforts are underway in the energy sector to transition towards a more competitive energy market.

He mentioned that the private sector is being positioned to spearhead the country’s growth, with the government providing a robust policy framework and ensuring policy continuity. To achieve fiscal discipline, the government has embarked on a right-sizing exercise and implemented pension reforms. New recruits to the civil bureaucracy are now enrolled in a defined contribution system, ensuring long-term sustainability and efficiency.