FINANCE Minister Muhammad Aurangzeb’s post-budget news conference on Wednesday demonstrated the government’s intent and seriousness to enhance the tax to GDP ratio, which indeed is the key in addressing the economic challenges and steering the country towards self-reliance.
In his presser, Aurangzeb emphasized the need to widen the tax base and digitize the economy, alongside implementing a progressive income tax regime, eliminating non-filers, and protecting low-income groups. These steps, if successfully executed, can significantly boost the tax-to-GDP ratio from the current unsustainable level of below ten percent to a more robust thirteen per cent within the next three years. Such an increase is critical for economic stability and growth, reducing reliance on foreign loans which have historically compounded Pakistan’s economic woes. However, the road to achieving this goal is fraught with challenges. Previous governments had similarly expressed intent to enhance the tax-to-GDP ratio but fell short of their objectives. The effectiveness of the current administration’s efforts remains to be seen. One major hurdle is the resistance from retailers who have historically been reluctant to enter the tax net. Despite the Federal Board of Revenue’s (FBR) registration of thirty-one thousand retailers, this is a drop in the ocean compared to the over two million retailers operating in the country, one of the fastest-growing retail markets in the world. Moreover, the government must not stop at retailers. Key sectors like agriculture and real estate also need to be brought into the tax net. In addition ensuring that businesses pay their due share of taxes will not only broaden the tax base but also reduce the disproportionate burden currently shouldered by honest taxpayers. It is a challenging journey, but with determination and transparency, it is a goal within reach. Reliance on foreign loans is no longer a viable option; these loans have only deepened our economic troubles. Thus, widening the tax base is essential for financial independence and economic stability.
As the government pushes for a broader tax base, it must also focus on improving social sectors, particularly health and education. The provinces will also have to play their part in this regard as greater resources under the NFC go to them. Public trust in the government’s fiscal policies will grow if they will see tangible benefits from their tax contributions. In many western countries, robust systems and transparent governance ensure that tax revenues are effectively spent on public welfare, fostering a culture of compliance. We must strive to replicate this model, ensuring that taxpayer money is judiciously used for the collective good.
Additionally, it is also for the government to address the concerns of salaried persons regarding tax increase. They are already compliant taxpayers, with taxes deducted directly from their salaries. Given the current economic pressures, including rising gas and electricity tariffs, it is unfair to impose further financial burden on them. The government should seek to balance revenue generation with fairness, ensuring that tax policies do not disproportionately impact those who are already contributing their fair share.
