ByAddressing the gathering, Langrial revealed that Pakistan’s tax-to-GDP ratio stands at 10.3%, significantly lower than the required benchmark. He pointed out that the sales tax-to-GDP ratio is just 3%, whereas it should be at least 5%. Highlighting the gaps in the system, he noted a shortfall of PKR 3.1 trillion in sales tax collection and PKR 2 trillion in income tax collection.
Langrial underscored the importance of broadening the tax base, noting that Pakistan has an estimated 67 million employed or job-seeking individuals. Among them, the top 1% earners, approximately 670,000 individuals, are expected to contribute significantly to income tax. However, only 200,000 are paying their fair share, resulting in an untapped potential of PKR 1.7 trillion in tax revenue.
He stated that increasing the tax-to-GDP ratio to 14% is crucial for stabilizing the economy. To achieve this, the FBR has launched a Transformation Plan aimed at improving efficiency and restructuring its operations. He also mentioned recent developments, such as an uptick in formal imports in November, the reorganization of the Customs Enforcement Wing, and expedited tax refunds. Notably, the FBR disbursed PKR 70 billion in tax refunds in November, a significant increase from the PKR 35 billion issued annually in previous years.
LCCI President Mian Abuzar Shad highlighted the business community’s concerns, stating that while businesses are willing to pay taxes, the complex and burdensome tax system is a major deterrent. He pointed out challenges such as frequent audits, the FBR’s access to bank accounts, and surcharges, which discourage businesses from formalizing their operations.
Presenting data from the fiscal year 2023-24, Shad noted that the FBR collected PKR 9,311 billion, with direct taxes accounting for PKR 4,530 billion, customs duties at PKR 1,104 billion, sales tax at PKR 3,098 billion, and Federal Excise Duty (FED) at PKR 577 billion. Despite this significant contribution, he expressed skepticism about achieving the ambitious target of PKR 12,970 billion set for the current fiscal year.
Shad proposed simplifying the tax regime and raising awareness about the benefits of entering the tax net. He also stressed the need for consistent policies to build trust among businesses and improve economic conditions.
LCCI Senior Vice President Engineer Khalid Usman added that Pakistan’s tax-to-GDP ratio remains one of the lowest in the region, underscoring the urgent need for reforms to align with regional benchmarks.
The meeting highlighted the shared commitment of the FBR and the business community to drive economic growth through a more effective and equitable taxation system.
