January 27, 2025 – In a significant move to enhance fiscal transparency and combat benami (undisclosed) transactions, the Pakistan Business Council (PBC) has presented a set of proposals aimed at broadening the country’s tax base and encouraging non-filers to become part of the formal tax network. These proposals were shared during a meeting with the Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, as part of the ongoing consultation process leading up to the Federal Budget for FY 2025-26.
The PBC delegation, led by Chairman Shabbir Diwan, included Vice Chairperson Zeelaf Munir, CEO Ehsan Malik, and other key members, according to the press release issued today. The discussions were centered on addressing long-standing challenges related to tax evasion, informal economies, and inefficiencies in the tax system. The delegation emphasized the need for comprehensive reforms to promote transparency, reduce taxpayer harassment, and increase compliance.
One of the central proposals from the PBC was to discourage the parking of untaxed money in informal sectors and encourage the formal documentation of the economy. The delegation recommended creating incentives for tax filers, which would not only incentivize current taxpayers but also encourage non-filers to voluntarily register and contribute to the tax net.
The PBC’s recommendations also included measures to improve the overall tax regime, with a focus on achieving sustainable growth and supporting social development in Pakistan. The proposals stressed the importance of aligning the country’s economic policies with these objectives to ensure long-term stability. Among the key priorities discussed were balancing the external account through export growth and indigenization, as well as improving the fiscal account by broadening the tax base and formalizing more sectors of the economy.
The PBC further suggested the imposition of competitive tax rates and long-term policy predictability, which would create a more favorable environment for businesses. One of the major points raised was the need for a simplified, unified, and digitized tax return process that minimizes the impact on business cash flow. By improving the ease of compliance, the PBC hopes to make it easier for businesses to adhere to tax regulations while fostering a more transparent economy.
Minister Aurangzeb acknowledged the PBC’s comprehensive proposals and expressed his appreciation for their contribution to the discussion. He assured that teams from the Federal Board of Revenue (FBR) would work closely with the PBC to review all suggestions and determine the best course of action. The minister reiterated the government’s commitment to building an equitable, efficient, and optimal taxation system that would be more effective in fostering growth.
Additionally, the minister announced that the tax policy unit would be moved out of the FBR and placed within the Ministry of Finance to shield tax policy decisions from the pressures of revenue collection. This move is intended to ensure that tax policies are designed to foster long-term economic health rather than short-term revenue targets.
In terms of fiscal sustainability, Senator Aurangzeb highlighted Pakistan’s low tax-to-GDP ratio, which stands at a concerning 8-9%. He described this as unsustainable for the country’s fiscal health and global standing, stating that the government’s goal is to raise the tax-to-GDP ratio to 13.5% within the next three years. Achieving this target will require broadening the tax base, leveraging technology, and streamlining tax processes, according to the finance minister.
The meeting concluded with both parties expressing optimism about the potential for collaboration to align Pakistan’s fiscal policies with the nation’s growth and development objectives. By embracing these reforms and improving the tax system, Pakistan hopes to strengthen its fiscal position and support long-term economic stability.