ISLAMABAD: Federal Minister for Finance and Revenue Muhammad Aurangzeb on Tuesday highlighted that 43 percent of the sectors in Pakistan’s economy pay less than one percent of the total tax collected, urging wholesalers, distributors and retailers to improve their contributions.
Pakistan’s narrow tax base and persistent tax evasion issues lead to insufficient revenue collection for the country’s fragile economy each year. The shortfall exacerbates the government’s tendency to run a high fiscal deficit, often financed through domestic and international borrowing, which increases the nation’s debt burden.
The country’s top tax collection body, the Federal Board of Revenue (FBR), collected Rs1.455 trillion ($5.2 billion) in July-August against the projected target of Rs1.554 trillion ($5.6 billion), according to provisional figures compiled officially over the weekend.
“43 percent sectors of this economy pay less than one percent tax so we have to make a collective effort and request these sectors to contribute otherwise we will keep going to the IMF [International Monetary Fund] for more [loans],” the finance minister said.
“Wholesalers, distributors, retailers we request you again to make a move to contribute to the country’s economy,” he continued. “We request them to help us.”
The minister made it clear the tax imposed on these sectors would not be withdrawn, pointing out that such a step would create more problems for the salaried class and manufacturing sector.
Pakistan has set a challenging tax revenue target of Rs13 trillion ($46.66 billion) for the current fiscal year, nearly a 40 percent increase from the previous year, to strengthen its case for a new bailout deal with the IMF.
The South Asian nation’s new administration has also decided to digitalize the tax collection system to prevent leakages, even as a large segment of the national economy remains undocumented.
Aurangzeb highlighted his commitment to cutting down the size of the federal government, adding that a method was being followed in which six ministries were initially chosen, of which two would be abolished.
However, he did not specify which ministries he was referring to.
“There will also be a reduction in the number of officers from grade 17 to 22,” he added. “We are closing the entities and departments that can be shut down.”
The minister said once the implementation of “rightsizing” the initial ministries was completed, the government would address the next five ministries and continue the process.
He also mentioned that remittances had remained at an all-time high in recent months, and highlighted that rating agencies Fitch and Moody’s had also upgraded Pakistan’s ranking by one notch.