Finance minister dismisses criticism of FBR powers as 'propaganda'
Speaking to reporters at the Overseas Investors Chamber of Commerce and Industry (OICCI), Aurangzeb said the measures had been formally passed by the National Assembly in consultation with the Standing Committee, countering claims that the powers were imposed without oversight.
He clarified that the additional FBR powers apply exclusively to cases involving over Rs50 million in tax evasion not on ordinary businesses.
Read: Finance Act 2025: businesses bear brunt of tax reforms
'The new legal tools have been implemented solely to prevent fraudulent activity related to sales tax,' Aurangzeb said.
He announced that an important meeting with presidents of chambers of commerce will be held tomorrow, where the government will explain the scope and intent of the FBR's actions to business leaders.
Boosting investor confidence
Aurangzeb called for stronger cooperation between local and foreign investors, saying such collaboration is critical to boosting economic recovery and long-term stability.
He said that the government had paid $2.3 billion in profits to multinational companies, a move aimed at reinforcing investor trust amid ongoing fiscal reforms.
He added that refund issues facing multinational firms would be resolved soon, as part of wider efforts to improve Pakistan's business environment.
In a bid to deepen engagement, the senior leadership of the Overseas Investors Chamber of Commerce and Industry (OICCI) has been invited to Islamabad for a meeting with Prime Minister Shehbaz Sharif.
Aurangzeb also said remittance volumes were commendable, and that macroeconomic indicators are expected to show further improvement in the coming days.
Read more: High population deters development
The finance minister said that the government had paid Rs75 billion in sales tax refunds this month and was encouraging private sector participation in state-owned enterprises (SOEs) facing financial losses.
Aurangzeb said the ECC was closely monitoring food prices monthly, noting that no irregularities had been observed in the prices of maize, rice, and pulses.
Commenting on the financial sector, the minister noted that Pakistan's banking industry is consistently supporting the national economy, especially in the wake of recent liquidity and lending shifts.
He cited a fresh survey by the OICCI which he said reflects renewed investor confidence and signs of economic stability.
Aurangzeb said Pakistan's banking sector must now increase lending to the private sector, as the country moves toward sustainable economic development.
The finance minister confirmed he had held a meeting earlier in the day with the Governor of the State Bank and presidents of commercial banks to discuss the financial sector's evolving role.
He stated that Pakistan's financial outlook has improved, leading to an increase in bank liquidity, which should now be directed toward boosting private sector credit, particularly for SMEs and agriculture.
Aurangzeb added that the Privatisation Commission has been handed 24 state-owned enterprises (SOEs), signalling a fresh push for divestment of loss-making public sector firms, including Pakistan International Airlines (PIA).
'Banks have a critical role to play, especially in privatisation initiatives like PIA,' the minister said, suggesting that financial institutions collaborate with sponsors to revive distressed industries.
He called for joint efforts between public and private sectors to rehabilitate underperforming state institutions, framing it as essential to long-term structural stability
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Express Tribune
4 hours ago
- Express Tribune
Retailers denounce harsh tax measures
Policymakers are expected to continue improvements on tax collection side to widen the tax net by signalling reduction in corporate and salary tax by 1% per year for the next 10 years and by reducing industrial energy tariffs. photo: file Listen to article The Chainstore Association of Pakistan (CAP), which represents the country's organised retail sector, has voiced concerns over harsh tax measures and enforcement practices, particularly those introduced through the Finance Act 2025. "Retail chains in the formal sector have worked tirelessly for years to adopt technology, ensure transparent sales reporting and contribute significantly to the nation's tax revenues as well as its exports," said Asfandyar Farrukh, Chairman CAP. "Yet, we face an unsustainable environment where legitimate businesses are treated as potential offenders, subjected to arbitrary tax assessments and left exposed to daily harassment that threatens both our operations and workforce." The association noted that while formal retailers accounted for only around 10% of Pakistan's retail trade, they generated the majority of tax revenue from the sector. However, recent tax policies and enforcement actions have placed growing pressure on the industry and threaten progress in documenting the economy. "It is our considered view that, given ever-increasing revenue targets and the slow pace of broadening the tax base, some FBR field formations are using enforcement powers to impose excessive and arbitrary tax assessments and penalties on the already compliant businesses simply to boost collections," said Tariq Mehboob, Patron-in-Chief of CAP. Similarly, the SITE Association of Industry Karachi rejected the controversial Sections 37A and 37B introduced in the Finance Act, declaring that the industrial community would not tolerate such oppressive laws. SITE Association President Ahmed Azeem Alvi condemned the provisions of these laws, which granted powers to FBR officers to arrest honest taxpayers based solely on suspicion and even file FIRs.
Express Tribune
4 hours ago
- Express Tribune
PM advises FBR to go slow on curbing cash economy
Listen to article Prime Minister Shehbaz Sharif has directed officials to gradually implement the decision of treating half of cash expenses above Rs200,000 as part of income as the business community defers its strike, except for the Lahore Chamber that will press ahead with plans to close shops on Saturday. The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) postponed the strike for one month after meeting the government's economic team at the Ministry of Finance on Tuesday. However, the Lahore Chamber of Commerce and Industry (LCCI), which was once considered close to the PML-N, announced that it would go on strike on July 19. LCCI President Mian Abuzar Shad said that his chamber would observe the strike due to rejection of its demand to defer the enforcement of the law for one month. The business community wants immediate withdrawal of the Federal Board of Revenue's (FBR) authority to arrest people on allegations of fraud, powers to add back 50% of cash expenditure above Rs200,000 to the income and depute taxmen in factories. It also demanded that the FBR's discretion to determine input adjustments and the enforcement of electronic invoicing should be suspended. In a meeting held at the PM Office on Monday, Shehbaz Sharif asked tax authorities to adopt a go-slow policy instead of swiftly enforcing the recently approved tax law, according to the government sources. They said that the PM was of the view that the FBR may gradually implement the condition of adding back the cash expenditure of over Rs200,000 to the income. The step has been taken in the budget to discourage the use of cash by traders and firms. According to new Section 21S and Q of the Income Tax Ordinance, 50% of the expenditure claimed in respect of sale where the taxpayer received payment exceeding Rs200,000 otherwise than through a banking channel or digital means against a single invoice containing one or more than one transactions of supply of goods or provision of services will be treated as income. Section 21(q) states whereby 10% of the claimed expenditure attributable to purchases made from persons who are not National Tax Number (NTN) holders shall be disallowed. However, the tax authorities were trying to find a mechanism to adopt a gradual approach as it would require amendment to the ordinance. One of the options was to issue an explanatory note but it would lack the binding legal force. Pakistan's leading business chambers on Tuesday again asked Finance Minister Muhammad Aurangzeb to immediately suspend the laws that authorise the arrest of taxpayers and penalise the use of cash. The government claimed that it could not suspend the law until the International Monetary Fund (IMF) was taken into confidence. Interestingly, last week the government bypassed the IMF to exempt taxes on sugar import. In a press note, the finance ministry said that an important meeting was held with representatives from the business community, chambers of commerce and traders' organisations. The meeting thoroughly discussed concerns over Section 37A and other related matters introduced under the Finance Act 2025. Aurangzeb assured the business community of the government's full cooperation, emphasising that the objective was to prevent large-scale tax fraud and not to harass legitimate and honest businesses. It was decided in the meeting that a committee would be formed under the chairmanship of Special Assistant to Prime Minister on Industries and Production Haroon Akhtar Khan. Besides government officials, the committee will also comprise nominated representatives from the business community. The committee will hold detailed consultations over 30 days and present a mutually agreed solution to the PM. After the meeting, FPCCI President Atif Ikram Sheikh announced the postponement of the strike for one month. However, he was immediately interrupted by the LCCI president, who said that Lahore would observe the strike because of the rejection of its demand. The finance ministry first announced that the business community had postponed the strike but later it issued an amended version and deleted the sentence related to the strike. Suhail Altaf, representing the Rawalpindi Division, said that the government had assured that it would not create hurdles in the way of business activities until the matter was resolved by the committee. The FBR on Tuesday also issued new instructions to empower the district administration to seize cigarettes being sold without valid tax stamps.
Express Tribune
5 hours ago
- Express Tribune
Moody's questions missed tax target
Listen to article Moody's, a global credit rating agency, on Tuesday inquired about the implications of missing a key target of increasing the tax-to-GDP ratio to 10.6% in the last fiscal year, as Pakistan made an emphatic pitch for an upward revision in the current junk rating. The credit rating agency also asked about progress in trade talks with the United States and whether the central bank was still exercising any control over imports and the exchange rate market, according to officials privy to the meeting details. Moody's raised these questions during a session with Pakistan's Finance Minister Muhammad Aurangzeb. Minister of State for Finance Bilal Kayani and Governor State Bank of Pakistan Jameel Ahmad also attended the session, which would determine whether the rating agency would upgrade Pakistan in its next announcement. Pakistan's current Moody's rating is Caa2 with a positive outlook. This rating was upgraded from Caa3 with a stable outlook in August 2024. But it is still below the investment grade and hampers Pakistan's smooth entry in the international capital markets to raise debt. According to the officials, Moody's asked about the impact of missing the tax-to-GDP ratio in the last fiscal year on this fiscal year's targets. Aurangzeb said that the Federal Board of Revenue (FBR) would give a separate briefing to the rating agency for addressing any of its concerns, according to the officials. The FBR's tax-to-GDP ratio remained at a little over 10.2% as against the target of 10.6% after the FBR could pool only Rs11.745 trillion in taxes in the fiscal year 2024-25. The government missed the annual tax collection target by a margin of Rs1.225 trillion. After the meeting that Moody's team was provided with a comprehensive overview of Pakistan's reform journey, with a particular emphasis on improving the tax-to-GDP ratio through technology-driven tax administration reforms, digitisation of systems, and robust enforcement measures. The minister emphasised that under the direct oversight of the prime minister — who chairs regular meetings on tax reform — the government was implementing measures to expand the tax base, plug leakages, and enhance compliance. Aurangzeb noted that the Rs2 trillion revenue delta achieved this year had come through autonomous efforts, and the government was firmly committed to reaching a tax-to-GDP target of 13 to 13.5% in the next few years, according to the ministry. Moody's also asked about the details of the Pakistan-US trade talks but the government did not share any details except that the deal was expected soon. The sources said that the United States has asked for preferential trade treatment to which Pakistan has proposed to sign a pact. "Ongoing discussions with the United States on preferential tariff access were noted as making encouraging headway," the Ministry of Finance stated after the meeting. There were also questions about the average interest rate that the government used for allocating the Rs8.3 trillion for debt servicing for this fiscal year. Moody's was informed that a 12% average interest rate had been used for this fiscal year. Moody's asked about the movement in the exchange rate and any restrictions on imports. The central bank clarified that the exchange rate was market determined and there were no restrictions on imports. The rupee has again started coming under pressure and the grey market is resurfacing with a rate that is about Rs7 per dollar higher than the inter-bank rate, according to the exchange market dealers. According to the finance ministry, the Finance Division provided an in-depth briefing on Pakistan's macroeconomic outlook, reform agenda, and financial stability. "Looking ahead, the finance minister expressed optimism that the improving macroeconomic indicators and reform momentum would be positively acknowledged by rating agencies, further strengthening Pakistan's case to tap international markets and deepen its external sector stability," said the ministry. Aurangzeb and his team presented compelling evidence of macroeconomic recovery, including a sharp reduction in inflation, a cut in the policy rate, stabilisation of the exchange rate, a current account surplus, and a surge in foreign exchange reserves — crossing $14 billion by the end of June, stated the ministry. It added that the improvements in remittance inflows and export performance were also cited as signs of resilience and renewed investor confidence. During the session, the finance minister apprised the Moody's team of the significant strides Pakistan has made in stabilising its economy and laying the foundations for sustainable and inclusive growth, it added. He underlined the successful completion of the final International Monetary Fund (IMF) review under the Stand-By Arrangement, including the disbursement of the second tranche and progress under the Resilience and Sustainability Facility (RSF), as key milestones that have restored confidence in Pakistan's economic management. The minister highlighted a series of structural reforms undertaken by the government to anchor long-term stability. These included prudent fiscal measures in the recently announced budget, tariff and trade liberalisation geared towards export-led growth, and concerted efforts to rationalise expenditure. The meeting further outlined Pakistan's re-engagement with global financial markets, including the successful arrangement of $1 billion in commercial financing from the Middle Eastern region, plans for an inaugural Panda bond, and Pakistan's intent to explore the Eurobond and other international debt markets as credit ratings improve. The finance minister also addressed queries from the Moody's team and reiterated Pakistan's commitment to staying the course on macroeconomic reforms, including in areas of privatisation, restructuring of state-owned enterprises (SOEs), and right-sizing of government.
