FPCCI leader warns IMF-backed sales tax hike to 19% could further shrink registrations and expand the grey economy
KARACHI: Khurram Ijaz, General Secretary and former Vice President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has expressed concern over the declining number of active sales tax registrations in the country, describing it as a reflection of a growing trust deficit in the taxation system due to high sales tax rates.
He said that the reported demand by the International Monetary Fund (IMF) to increase the standard sales tax rate from 18 percent to 19 percent would further worsen the situation and expand the undocumented economy.
Commenting on recent figures related to the Active Taxpayers List (ATL) of sales tax registered persons, Khurram Ijaz noted that the number of active registrations declined to around 189,000 in April 2026 from approximately 210,000 in April 2025.
He said it was surprising that despite repeated claims by the Federal Board of Revenue (FBR) regarding the broadening of the tax base and documentation of the supply chain, the number of registered taxpayers was declining.
“People are moving out of the system because of harassment, complex procedures and the high rate of sales tax,” he said.
Referring to reports regarding the IMF’s proposal to raise the sales tax rate to 19 percent, Khurram Ijaz said such a move would only encourage the growth of the grey economy, as more businesses and individuals would prefer to remain outside the tax net.
He urged the FBR to simplify registration procedures for industries, businesses and importers to encourage greater participation in the sales tax regime. He also called upon provincial tax authorities to harmonize their procedures and regulations with federal tax laws in order to facilitate taxpayers and reduce compliance burdens.
Khurram Ijaz observed that the current sales tax structure appears to be discouraging businesses from registering and remaining within the documented economy. According to him, the standard sales tax rate of 18 percent is already one of the major barriers to registration and compliance.
He further highlighted that delays and difficulties in obtaining sales tax refunds continue to create financial hardships for taxpayers and businesses.
To promote documentation and improve compliance, Khurram Ijaz proposed a reduction in the standard sales tax rate and the introduction of taxpayer-friendly measures that would help restore confidence in the taxation system.
He emphasized that sustainable growth in tax revenues can only be achieved through trust, transparency and facilitation rather than excessive taxation and enforcement measures.
