Pakistan's finance minister said the country will be able to meet its revenue goals for the year, without adding further strain on existing taxpayers, at a time the government looks to curb the criticism it has faced since last year over unpopular reforms, including record-high taxes.
“We are moving in the right direction,” Muhammad Aurangzeb said in an interview with Bloomberg News at a conference in AlUla, Saudi Arabia, on Sunday. “Any shortfall is going to be met through expanding the net and stronger compliance.”
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Raising tax-to-GDP ratio is a key condition of Pakistan's $7 billion loan deal with the International Monetary Fund, which was needed to shore up a faltering economy and manage its mounting debts. To secure the deal, Prime Minister Shehbaz Sharif's government forced through higher tax rates and increased energy prices last year, leading to intense public backlash.
In his interview, Aurangzeb said he is confident about meeting the key requirements of the IMF program, as Pakistan's tax-to-GDP ratio stood at 10.8% at the end of December, higher than the target of 10.6%. No new revenue measures will be added this fiscal year ending June, he said. The country's first review of the program is scheduled for later this quarter.
On the country's plans to introduce new agriculture income tax laws, the minister said “it is a very important step in terms of broadening the tax base.” The country's four provincial assemblies recently approved laws to hike taxes on agricultural income, a move agreed with the IMF to help expand the tax net.
Pakistan narrowly escaped default in 2023, and businesses are still suffering because of high taxes and energy costs. Earlier this month, IMF's Managing Director Kristalina Georgieva said she is encouraged by Pakistan's attempts to pave the way to higher growth.
When asked about the impact of US President's new tariffs proposal, Aurangzeb said the changes could be a “real opportunity” for Pakistan to step up regional trade with nations in the Middle East and Central Asia.
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