Pakistan cannot afford ‘free riders’: Aurangzeb calls for fairer tax contribution

Finance Minister Muhammad Aurangzeb stressed the need to bring the undocumented economy into the tax net, saying the country cannot afford ‘free riders’.

“We cannot continue to go back to the same for more. The manufacturing industry, to a certain extent the services industry and the salaried class are carrying a disproportionate burden.

“This is not sustainable, and the only way we are going to bring in sustainability if other segments including agriculture, retail and wholesale, real estate step up,” Pakistan’s finance minister said while delivering a keynote address at the conference “Retail Reimagined: Innovate, Collaborate & Thrive”, organized by Pakistan Retail Business Council (PRBC).

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Aurangzeb pointed out that the formal sector is paying taxes, “and to a certain extent subsiding those who are free riders, which is not sustainable”.

“This country cannot afford that people want to take a free ride and don’t want to come into the tax net. We just can’t afford this anymore,” he said while emphasizing the urgent need to document the parallel economy.

Coming to the retail sector, Aurangzeb highlighted that the segment contributes 19% to the overall GDP, but noted that its contribution to the exchequer stood at only 1%.

Economic indicators improving

Speaking about the economy, Aurangzeb reiterated that the macroeconomic indicators have improved including a decline in inflation, policy rate, currency stability and improvement in foreign exchange reserves.

“We are engaged with the rating agencies and are very hopeful that during this year, we will get back into the single B category, which is going to be very important in terms of diversifying our funding base and getting back into the international capital market,” said Aurangzeb.

He said that the government intends to make Pakistan “a bankable brand again” and avoid “another boom and bust cycle”, emphasizing achieving sustainable and inclusive growth.

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To achieve this “the focus has to be on structural reforms, and the structural reforms are already underway, around taxation, energy, SOEs and public finance”, said Aurangzeb.

Structural reforms and rightsizing

Aurangzeb highlighted that a “real transformation” is underway on the taxation side. “It is very important to restore the trust and credibility in the tax authority,” he said.

“We simply cannot afford that the people don’t want to deal with the tax authorities of the country,” he said.

Regarding government rightsizing, Aurangzeb said that a comprehensive plan is ready for implementation.

He lauded the role of Dr Ishrat Hussain for his contribution towards the institutional reforms during the previous government of Pakistan Tehreek-i-Insaf. “He [Hussain] prepared the whole framework on how to conduct the rightsizing of the government,” the finance minister said.

Aurangzeb acknowledged that the government has faced “hiccups” in its drive towards privatization.

“The privatization process of PIA is getting to be relaunched, but we are very determined to take this forward,” he said.