Karachi, April 6, 2024 – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has put forth a comprehensive solution aimed at elevating the tax-to-GDP ratio to 15 percent, addressing the pressing need for fiscal stability and economic growth in Pakistan.
In a statement issued on Saturday, Atif Ikram Sheikh, President of FPCCI, underscored the organization’s support for enhancing the tax-to-GDP ratio. However, Sheikh emphasized that achieving this target necessitates a strategic approach focused on expanding the tax base and streamlining the taxation system, rather than burdening the already taxed populace. He asserted, “The only pragmatic approach to achieve a tax-to-GDP ratio of 15 percent in the next 5 years is to add 1.5 to 2 million new taxpayers to the tax net.”
Sheikh cautioned against unilateral tax and Federal Board of Revenue (FBR) reforms, emphasizing the importance of consulting with the business community to ensure the efficacy and fairness of such measures. He highlighted the failure of past attempts to reform taxation without proper consultation, which often led to increased taxes on existing filers, discouraging compliance and hindering economic growth.
The FPCCI President outlined a three-pronged strategy to broaden the tax base, including end-to-end digitalization of the taxation system for transparency and fairness, FBR reforms in consultation with the business community, and addressing maladministration and harassment faced by the trade and industry sectors.
Acknowledging the economic challenges exacerbated by the COVID-19 pandemic, floods, and other factors, Sheikh stressed the need for Pakistan to enter into a new, expanded, and longer-term IMF program. However, he cautioned against further tax burdens on already struggling businesses, citing the unprecedented difficulties faced in recent years.
Highlighting positive economic indicators, Sheikh noted a reduction in core inflation to 12.8 percent and headline inflation to 20.7 percent in March 2024, the lowest figures in 22 months. He expressed optimism regarding the downward trajectory of inflation in the coming months.
In light of these developments, Sheikh called for a timely reduction in the key policy rate and the introduction of regionally-competitive export finance schemes and long-term financing facilities for exporters. These measures, he argued, would bolster the export sector and contribute to economic recovery and stability.
The FPCCI’s proposal comes at a crucial juncture for Pakistan’s economy, with the need for fiscal reforms to ensure sustainable growth and alleviate the economic challenges facing the country. As stakeholders continue to debate and deliberate on the best path forward, the FPCCI’s recommendations offer a roadmap towards achieving a more robust and equitable tax system, essential for Pakistan’s long-term prosperity.
