Stakeholders for more equitable, transparent tax structure

LAHORE: A majority of participants at the Business Recorder Forum on challenges facing Pakistan’s textile sector backed the normal tax regime over the fixed tax regime, calling for a more equitable and transparent tax structure that accurately reflects actual income levels.

Director Business Recorder Research Ali Khizar leading the session, brought together leading industry figures, tax experts and agricultural specialists to deliberate on the mounting pressures confronting one of Pakistan’s most vital export sectors.

Chairman of the All Pakistan Textile Mills Association (APTMA), Kamran Arshad, sounded the alarm over shrinking cotton cultivation areas, warning that the government’s decision to permit construction of sugar mills in traditional cotton-growing regions is directly threatening the raw material supply the textile sector depends upon.

READ MORE: Taxes & enforcement: Finance Bill may introduce Rs1trn measures

Arshad described the fiscal environment as unsustainable, stating that the government currently takes back as much as 60 percent of earnings through various taxes.

“How can a businessman realistically operate and grow under such a heavy financial burden?” he wondered, urging the government to provide electricity and gas at rates competitive with regional peers as a prerequisite for boosting exports.

Arshad also rejected the newly-enacted Punjab Infrastructure Development Cess, warning that a 0.90 percent levy on goods manufactured, imported or exported through the province would accelerate deindustrialisation and cost jobs.

Signed into law by Governor Punjab Sardar Saleem Haider Khan, the cess, he argued, creates a double taxation burden for Punjab-based manufacturers who already pay the Sindh Infrastructure Cess on consignments transiting that province an inequity that Sindh-based competitors do not face.

He cautioned that the widening cost gap between Punjab and manufacturers in Sindh, Khyber Pakhtunkhwa and former FATA regions would push existing businesses to relocate and deter new investment.

Shahzad Saleem, Chairman of Nishat Chunian Group, delivered a blunt assessment, stating that Pakistan’s economy is in terrible shape owing to decades of poor decision-making and a persistent reliance on stopgap measures rather than long-term structural reform.

He called on the government to place its development expenditure budget on hold to ease the fiscal burden.

Saleem also cited the Employees’ Old-Age Benefits Institution (EOBI) as an example of institutional mismanagement, questioning why pensioners receive so little despite the body holding billions in real estate assets.

He warned that imposing excessively high taxes in a country with an already enormous black economy would drive activity underground rather than bringing it into the formal sector, and urged the government instead to ensure reasonable tax rates alongside free healthcare, quality education and security for citizens.

On energy, Saleem argued that public discourse has presented only one side of the circular debt story, questioning accountability for the massive cost escalation of the Nandipur Power Project and noting it is ordinary Pakistanis who ultimately bear the cost.

Former chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), Mubashar Naseer Butt, argued in favour of the fixed tax regime, cautioning that granting additional powers to the Federal Board of Revenue would increase the risk of harassment against businessmen. He highlighted a disparity in turnover taxes, one percent on local sales against two percent on exports, and questioned how industry could survive when the overall tax ratio stands at 51 percent against a tax-to-GDP ratio of 13 percent.

Asad Shafi, Chairman of APTMA North Zone and owner of retail brand Cross Stitch, lamented that Pakistan has failed to capitalise on the trade war between the United States and China.

He called on the government to support thriving local brands in scaling to international markets and urged authorities to extend retail operating hours to 10 pm, warning that early market closures have inflicted a consistent 25 to 35 percent decline in daily revenues, with peak shopping hours between 8 pm and 10 pm being the heaviest casualty.

Aurangzeb Shafi, Director of Crescent Bahuman Limited, stressed that a complete supply chain must be in place before any brand can be successfully developed, and urged the government to resolve taxation and energy challenges on a priority basis.

Leading tax experts Ikram ul Haq and Huzaima Bukhari, along with an associate professor at the Suleman Dawood School of Business at LUMS, jointly called for a fundamental shift in the country’s taxation approach. They advocated for bringing the informal sector into the tax net rather than increasing the burden on compliant formal businesses, demanded a uniform tax structure free of preferential exemptions, and stressed the modernisation of the tax collection system to improve efficiency and transparency.

Agricultural expert Dr Anjum warned that Pakistan’s cotton crop — once celebrated as “white gold” has collapsed from over 14 million bales in 2005 to historic lows in recent years, driven by erratic weather patterns, severe heatwaves and devastating floods across key growing regions in Punjab and Sindh.

However, he offered a note of cautious optimism for the 2026 season in Bahawalpur division, a primary driver of Punjab’s cotton output. Farmers in the region achieved between 80 and 82 percent of an ambitious 567,000-acre cultivation target by late May, buoyed by targeted government initiatives and relatively favourable weather conditions.

The forum concluded with broad consensus that the government’s primary role must be to facilitate business and collect taxes not to run commercial enterprises and that reducing the tax burden is essential if Pakistan’s export sector is to recover and grow.

Copyright Business Recorder, 2026