Federal Board of Revenue (FBR) chief commissioner Aftab Alam said on Tuesday improving tax-to-GDP ratio was necessary to ease the government’s debt burden and help strengthen the economy.
He passed the remarks in an event held at the Association of Builders and Developers of Pakistan (ABAD) House in Karachi.
“India’s tax-to-GDP ratio is 17%, while Pakistan’s only 9%,” Alam said.
Earlier this month, Finance Minister Muhammad Aurangzeb said Pakistan’s tax-to-GDP ratio was expected to reach 10.6% by the end of the ongoing fiscal year.
“This will mark progress toward the government’s target of raising it to 13% by the conclusion of the 37-month Extended Fund Facility (EFF) with the International Monetary Fund (IMF),” Aurangzeb stated then during a Zoom meeting held with representatives of S&P Global Ratings as part of the ongoing Pakistan Sovereign Ratings Review.
The IMF sees Pakistan’s total tax revenue at 12.6% of the gross domestic product (GDP) for FY2024-25. In its report titled ‘First review under the Extended Fund Facility arrangement’, the lender projected the FBR collection at 10.7% of GDP for outgoing fiscal year (2024-25) against original target of 10.6%.
Alam acknowledged that taxpayers currently bear an excessive burden due to the limited number of contributors to the tax net.
He stressed the need to expand the tax base.
“In the recent conflict with India, Pakistan’s Army fulfilled its duty and now it’s our turn to do our part by paying taxes,” Alam said.
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Also speaking at the event, ABAD chairman Muhammad Hassan Bakshi said Pakistan was fighting an economic battle and, in such times, investment was essential.
The construction sector, he noted, could play a pivotal role in that regard.
He called upon the FBR and the government to formulate a long-term tax policy to promote investment in the country.
“The construction sector plays a key role in bringing investment to the country. Of the $34 billion sent by overseas Pakistanis, around 50% is being invested in the construction sector.”
ABAD chairman pointed out that frequent changes in tax laws created uncertainty for investors.
“Without consistency and transparency in the tax system, investment is not possible,” he said.
Bakshi emphasized that the construction industry was the largest employment-generating sector in the country, with 72 allied industries connected to it.
“This sector is entirely domestic, with both buyers and sellers being Pakistani.
“If we want to increase employment, we must promote the construction industry. Only when there is business, will there be tax collection.”
He also raised concerns about the tax notices sent to builders and developers, suggesting that a copy of each notice sent to ABAD members be shared with ABAD House so that legal assistance could be provided.
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Bakshi further called for the improvement of the valuation system and asked the FBR to appoint a focal person at ABAD House to ensure better coordination.
ABAD chairman revealed that in Karachi’s South District alone, 50 investment-ready projects worth $5 billion were lined up.
“This is our country, and we have to improve it ourselves,” he stated.
Bakshi mentioned that a subsidised housing finance scheme by the government for citizens would soon be introduced, under which buyers would be able to pay 20% as down payment and the remaining 80% in installments.
The initiative, he noted, could generate trillions of rupees in tax revenue for the FBR.
