Tax system termed barrier to economic growth
KARACHI: The Chairman of National Business Group Pakistan, the President of the Pakistan Businessmen and Intellectuals Forum, the President of All Karachi Industrial Alliance, the Chairman of the FPCCI Advisory Board, Mian Zahid Hussain, said on Tuesday that Pakistan's current tax system stands as a formidable barrier to the economic growth, stifling innovation and entrepreneurship.
He said that taxation complexities and inefficiencies create a challenging environment for businesses, diminishing their potential to thrive and expand.
Mian Zahid Hussain said that the flawed system hinders the vibrant spirit of economic progress, leaving many opportunities untapped in a country rich with potential. He said that the system is rooted in injustice and inequality and continues to fuel fiscal deficits, rising debt, and balance-of-payment crises. He said the government is under pressure from the IMF to reduce the budget deficit and achieve a primary surplus under the $7 billion loan programme.
However, he warned that the burden may again fall disproportionately on salaried individuals and the corporate sector; a fact that cannot be ignored and should be a cause for concern for all of us. The tax target for the current fiscal year was initially set at PKR 12.9 trillion; later, it was revised downward to PKR 12.3 trillion, with a projected shortfall of up to PKR 1 trillion. He said additional taxation seems inevitable to bridge this gap. The upcoming fiscal year's tax target is expected to be PKR 14.3 trillion.
The IMF is pressing for more revenue in the new budget. Still, he said it remains unclear whether the government will continue taxing compliant sectors or finally act against powerful groups that have long remained outside the tax net, referring to industries such as retail, real estate, and agriculture.
Mian Zahid Hussain emphasised that if the government truly intends to relieve the public and the salaried class, it must eliminate unnecessary tax exemptions and take action against tax evaders. He also stressed the need to address losses from state-owned enterprises, power, and gas sectors, which are straining public finances.
He acknowledged that certain industrial and trade groups strongly resist current tax reform plans. However, he urged the government to engage these stakeholders through meaningful dialogue and integrate them into the tax system.
He further advocated completely digitalising all business transactions to curb tax evasion and improve compliance. This move requires the active participation of all stakeholders.
The business leader said it is time to stop repeatedly targeting the salaried class. Instead, the government must go after those who earn billions but contribute nothing to national development. Mian Zahid observed that a fair and uniform tax policy is essential for justice and economic stability. He said that only a non-discriminatory taxation system where every citizen contributes according to their income can ensure sustainable development in Pakistan.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
an hour ago
- Business Recorder
Words of caution from Summer Davos
EDITORIAL: It's not every day that the president of the World Economic Forum warns of a 'decade of lower growth.' But that's precisely the message Børge Brende delivered at Summer Davos in Tianjin — a sobering forecast that goes beyond the usual Davos-speak of digital revolutions and climate partnerships. The world, he said, is entering its most geopolitically complex period in decades, and the headwinds facing global growth are intensifying, not fading. Markets have grown used to brushing off geopolitical shocks. The pandemic was followed by a rapid recovery. Russia's invasion of Ukraine triggered initial panic, but portfolio flows resumed quickly. Even the Israel–Iran war, despite its high stakes, has not yet translated into a prolonged financial crisis. But the accumulation of risks — trade fragmentation, armed conflict, political instability — is beginning to show up in macro projections. Both the World Bank and IMF have now revised global growth forecasts for 2025 downward, from 2.7pc to around 2.3pc. That may not sound catastrophic, but in a world fuelled by debt and liquidity, even a half-point drag on global GDP has wide-ranging implications. It affects not just trade flows and commodity demand, but sovereign debt sustainability, social stability, and the room central banks have to ease. Brende's warning is timely, not just because of the numbers, but because of the structural shifts underway. The world isn't simply in a slowdown — it's in the early stages of a strategic reordering. The US-China trade war, once dismissed as a Trump-era anomaly, is now institutionalised policy. China, which still accounts for about 30 percent of global growth, is shifting inward — away from export dependency and toward domestic consumption and digital services. That transition is necessary, but it's not without turbulence. Beijing's real estate market remains fragile, consumer confidence is uneven, and supply chain recalibrations are far from complete. If the Chinese engine sputters, the rest of the world will feel it. In parallel, the multilateral trade order that underpinned decades of growth is losing traction. New regional blocs, tariff walls, and subsidy races have become the norm. The return of industrial policy may excite national planners, but it fragments global efficiency. When war in one region sends insurance premiums, energy costs, and shipping rates soaring, it becomes harder to pretend these shocks are local. They're systemic—and cumulative. What's particularly worrying is that none of this exists in isolation. As Brende pointed out, the traditional lines between economic and security policy are now blurred. Conflict doesn't just disrupt supply chains; it drives trade strategy. Currency wars give way to chip bans. Defence deals morph into energy alliances. And through it all, global governance institutions struggle to keep pace. For developing economies, including Pakistan, this complexity is doubly dangerous. Growth in the Global South has historically ridden the coattails of open trade, capital flows, and commodity cycles. Now, with a flipped interest rate cycle, declining aid flows, and a global turn inward, that model is under pressure. And while the wealthy world debates reshoring and AI regulation, developing countries are facing food inflation, energy volatility, and climate shocks without the fiscal space to absorb them. The point is not that growth will vanish. It won't. But its sources, reliability, and beneficiaries are shifting. If the coming decade is marked by structural fragmentation and political brinkmanship, growth will become a more selective story—dependent on stability, institutional strength, and geopolitical alignment. Brende's message, then, isn't just a warning. It's a challenge to policymakers who still act like the post-2008 playbook applies. It doesn't. The new normal is one of overlapping crises, diminishing buffers, and increasingly short market patience. Anyone not preparing for that reality is setting themselves up for failure. Copyright Business Recorder, 2025
Business Recorder
2 hours ago
- Business Recorder
Sovereign default risk: Pakistan most improved economy: Bloomberg
ISLAMABAD: Pakistan stands out globally as the most improved economy in terms of reduction in sovereign default risk, as measured by CDS-implied probability. As per the latest data posted by Bloomberg Intelligence, Pakistan leads the world in sovereign risk improvement and tops global EM rankings. Pakistan topped Global EM Rankings in Default Risk Reduction, as the country has recorded the largest drop in sovereign default risk globally over the last 12 months. Pakistan leads emerging markets in sovereign risk recovery, says Bloomberg Intelligence According the data received here on Saturday, default probability down from 59 percent to 47 percent, a massive 1,100 basis points improvement. This marks the sharpest decline among major emerging markets, ahead of Argentina (-7 percent), Tunisia (-4 percent), and Nigeria (-5 percent). In contrast, countries like Turkey, Ecuador, Egypt, and Gabon have seen their default risks rise. This sharp decline in Pakistan's risk signals renewed investor confidence—fuelled by macroeconomic stabilization, structural reforms, successful IMF engagement & timely debt repayments, besides improved credit outlooks by S&P, Fitch, and others. This is a resounding signal to global investors: Pakistan is not only back on the map—it is moving forward with stability, credibility, and reform at its core.
Express Tribune
2 hours ago
- Express Tribune
Heavier gas burden
Listen to article As Pakistan's economic managers scramble to plug widening fiscal gaps and meet IMF benchmarks, the weight of their decisions continues to fall squarely on those least able to bear it. The latest move — a 50% increase in fixed charges on residential gas bills — is yet another blow to already struggling households. Without changing the per-unit gas tariff, the state has quietly increased the mandatory monthly cost of gas, turning an essential utility into a luxury for many. The decision, approved by the Economic Coordination Committee (ECC) of the Cabinet, will push fixed charges for protected domestic consumers from Rs400 to Rs600, regardless of how little gas they actually consume. This disproportionately penalises low-income households — the very segment these "protected" categories are meant to shield. Even those who use minimal gas to conserve energy will now see their bills swell, simply for staying connected to the grid. The timing of the decision — just days before the start of the new fiscal year — is also telling. It reflects the Finance Ministry's growing reliance on regressive measures to meet revenue targets in the face of mounting debt obligations. Furthermore, gas tariffs for non-residential consumers — including industries and power plants — have been increased by an average of 10%. While this may be aimed at rationalising subsidies and improving circular debt recovery, it risks compounding inflationary pressures and stifling industrial competitiveness. Yet, no clear roadmap has been presented for energy sector diversification or investment in sustainable alternatives. The lack of a progressive taxation model and repeated reliance on indirect levies do not show fiscal prudence and are making survival harder for ordinary Pakistanis. Austerity without accountability is not reform. And unless the state starts prioritising equity in its fiscal decisions, public trust will continue to deteriorate.
