Amid traders’ resistance to tax reforms, finmin calls for ‘collective efforts’ from all sectors

Finance Minister Muhammad Aurangzeb on Tuesday stressed the need for “collective efforts” from all sectors while speaking about increasing the tax-to-GDP ratio amid resistance to tax reforms from traders.

Traders and retailers nationwide have gone on multiple strikes against new tax measures introduced by the Federal Board of Revenue (FBR), particularly its Tajir Dost Scheme.

The scheme, which aims to formalise the retail sector by bringing traders and wholesalers into the tax net, has been opposed by various trade bodies since its inception.

Addressing a press conference in Islamabad today, the finance minister talked about the issue of taxation in the country and urged that it needed to be expanded to sustain the economy.

“Look, we are very clear that we need to take this forward and there is a very basic reason for it — last year, we only increased our tax revenue by 29 per cent, but we are still at 8.8pc tax-to-GDP,” he said.

“This is not sustainable at all. No country is sustainable at this level, so we need to increase it to 15pc.”

The finance minister added the FBR will have to “be absolutely clear about the implementation and the execution” of taxes, and request the sectors to make a “collective effort” by paying taxes.

He said there was no room left for avoiding taxes in the country, stressing that the current situation, where the salaried class and the manufacturing industry were already contributing more than their fair share relative to their GDP contribution, cannot continue.

“How long will this country keep being run like this?” he asked, “So my wholesalers, distributors, retailers — my brothers and sisters — I am requesting once again, please take a step forward to contribute to the country’s economy”.

Aurangzeb also addressed the reduction of inflation in August, which reached single digits, and said that the State Bank of Pakistan’s policy rate would likely follow suit.

“With the inflation coming down, you’ll likely see that the policy rate will also go down with it,” he said, adding that the economy will get a boost through the industry sector when the monetary rate goes down.

In other developments, he mentioned the global rating agencies Fitch and Moody’s upgrading Pakistan’s rating by one notch.

Recently, Moody’s upgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa2 from Caa3, saying the decision was due to “Pakistan’s improving macroeconomic conditions and moderately better government liquidity and external positions, from very weak levels”.

“As far as I’m concerned, this is external recognition [indicating] that the economy has already gone in the right direction,” Aurangzeb said.

“And just like the prime minister said, we have a long way to go, but we have to start from somewhere and the important thing is that the direction of travel has to be right so we can go towards a sustainable economy.”