Pakistan Government Will Not Support ‘Plots and Files’ Business, Finance Minister Aurangzeb Asserts
In a decisive statement, Finance Minister Muhammad Aurangzeb reaffirmed the government’s stance on structural reforms, emphasizing that it will not support the “plots and files” business model prevalent in Pakistan’s real estate sector. This speculative practice, which has raised concerns about its sustainability, involves buying and selling “plot files” instead of actual land, contributing to economic volatility and market distortion.
Addressing the issue at the “3rd All Pakistan Chambers Presidents Conference” held at the Faisalabad Chamber of Commerce & Industry (FCCI), Aurangzeb highlighted the need for a clear distinction between real estate business and construction. “We are all with the construction industry, but we need to differentiate between real estate and construction,” he said, underlining that the government will no longer support practices that fuel speculation.
The “plots and files” business involves purchasing plot files, which are documents representing future land in a developing housing society. These files allow buyers the potential to profit by selling them at a higher price before the land is fully developed or physically allocated. This speculative model has gained popularity in Pakistan but is now being viewed as unsustainable and detrimental to long-term economic growth.
The finance minister’s remarks reflect the government’s broader focus on ensuring that the country’s economic practices shift toward sustainable growth rather than speculative ventures. With Pakistan facing considerable economic challenges, these efforts aim to create a more stable and productive economic environment.
During the same conference, Aurangzeb addressed the concerns surrounding Pakistan’s reliance on the International Monetary Fund (IMF), acknowledging that the country has frequently turned to the IMF for financial assistance. “It is often questioned why we keep going to the IMF,” Aurangzeb said. “The reason is that we have not implemented the structural reforms needed to change the DNA of the economy.”
He pointed out that Pakistan’s low tax-to-GDP ratio, which hovers around 9-10%, is not sustainable. He stressed that with a population of approximately 240-250 million people, Pakistan must broaden its tax base to ensure sustainable economic progress. “In a country of 240-250 million people, if only a certain percentage are paying their taxes, progress cannot be made,” he asserted.
Further addressing the fiscal gap, Aurangzeb noted that the government’s target is to increase the tax-to-GDP ratio to 13.5%, which would be critical to achieving long-term economic stability. He explained that while charitable contributions can support essential services like hospitals and education, the government cannot operate sustainably on charity alone.
In an effort to simplify the taxation process, the finance minister revealed plans to improve the tax filing system for salaried individuals. By September, the government aims for 80-90% of the salaried class to be able to file their tax returns online without needing professional assistance from tax advisors or lawyers. This is a significant step toward making the tax system more accessible and efficient.
Aurangzeb also urged various sectors, including retail, wholesale, real estate, construction, and agriculture, to contribute fairly to the tax system. “Pakistan cannot afford ‘free riders,’” he said, calling for a more equitable tax contribution across all sectors of the economy.
In addition to fiscal reforms, the finance minister discussed the upcoming privatization process, which will begin next week with a stock take to review recommendations and outline future steps. “Next week we will start doing a stock take on who has recommended what, how we will take it forward, and what we can do in the context of a Fund program,” he stated, reaffirming that Pakistan must remain committed to the IMF program to ensure continued financial support.
As the government takes steps to address economic challenges, these structural reforms will be critical in guiding Pakistan toward a more sustainable and balanced economy. The finance minister’s call for reform, coupled with his focus on strengthening the tax system and curbing speculative practices, represents a pivotal moment in the country’s efforts to foster long-term economic stability.