Pakistan’s Finance Minister Muhammad Aurangzeb has underscored the importance of bringing the country’s undocumented economy into the formal tax net, stressing that Pakistan can no longer afford “free riders.” Speaking at the “Retail Reimagined: Innovate, Collaborate & Thrive” conference organized by the Pakistan Retail Business Council (PRBC), Aurangzeb pointed out the unsustainable burden placed on certain sectors, urging more participation from key industries such as agriculture, retail, wholesale, and real estate in contributing to the nation’s tax revenue.
Highlighting the disproportionate tax burden on the manufacturing industry, services sector, and salaried individuals, the finance minister emphasized that this approach is not sustainable in the long term. “We cannot continue to go back to the same for more,” Aurangzeb remarked, calling on other sectors to step up and play their part. He expressed that it is crucial to bring the parallel economy into the tax fold to ensure fiscal sustainability and balance.
Aurangzeb pointed out that while the formal sector is already paying taxes, it is inadvertently subsidizing those who evade taxation. “This country cannot afford that people want to take a free ride and don’t want to come into the tax net. We just can’t afford this anymore,” he asserted, stressing the urgent need for reforms that would bring the informal sector into the formal economic system.
One of the key issues discussed by the finance minister was the performance of the retail sector, which contributes a significant 19% to Pakistan’s overall GDP. However, despite its economic importance, the retail sector only contributes around 1% to the national exchequer in taxes. Aurangzeb emphasized the importance of enhancing tax compliance within this crucial sector to ensure equitable contribution from all parts of the economy.
In his speech, Aurangzeb also addressed Pakistan’s overall economic performance, noting several improvements in key macroeconomic indicators. He highlighted a decline in inflation, a reduction in the policy rate, currency stability, and an increase in foreign exchange reserves as positive signs that the country’s economy is on the right track. “We are engaged with the rating agencies and are very hopeful that during this year, we will get back into the single B category,” he stated. This milestone is considered critical for Pakistan to diversify its funding sources and regain access to the international capital market.
Aurangzeb also emphasized the government’s commitment to long-term, sustainable growth, stating that achieving this goal requires a focus on structural reforms. These reforms are already underway and focus on key areas such as taxation, energy, state-owned enterprises (SOEs), and public finance. He further outlined the government’s drive to make Pakistan a “bankable brand again,” avoiding the cyclical economic crises of past years.
As part of these reforms, the finance minister discussed the ongoing efforts to restore trust and credibility in Pakistan’s tax authority. He acknowledged the challenges faced in tackling tax evasion and emphasized that the country could not afford to have a population unwilling to comply with tax laws. Additionally, Aurangzeb touched upon the government’s rightsizing initiatives, stating that a comprehensive plan for rightsizing the public sector is ready for implementation.
Aurangzeb also praised Dr. Ishrat Hussain for his contributions to institutional reforms, particularly in the area of government rightsizing, which was outlined during the previous administration. The finance minister acknowledged that while privatization efforts, particularly in the case of Pakistan International Airlines (PIA), had encountered obstacles, the government remains committed to moving the process forward.
In conclusion, Finance Minister Aurangzeb’s remarks at the PRBC conference reflected the urgency of tax reforms and the importance of creating a more sustainable and inclusive economic framework in Pakistan. As the government continues its efforts to restructure the economy, the focus will remain on ensuring that all sectors contribute fairly to the nation’s growth, while simultaneously addressing critical areas of fiscal policy and governance.