Pakistan's Finance Minister Urges Traders for Tax Compliance to Stabilize Economy

Pakistan's Finance Minister Muhammad Aurangzeb urged traders to pay their taxes to boost revenue and stabilise the economy. Speaking at a press conference in Islamabad, he addressed the traders' recent nationwide strike against a new tax scheme aimed at including over 3.5 million retailers in the tax net.

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Aurangzeb highlighted that Pakistan's tax revenue increased by 29% last year but remains at an unsustainable 8.8% tax-to-GDP ratio. "This is not sustainable at all. No country is sustainable at this level, so we need to increase it to 15 per cent," he said. He emphasised the need for everyone to contribute fairly, noting that the salaried class and manufacturing industry are already paying more than their share.

Traders' Resistance to New Tax Scheme

The Federal Board of Revenue's (FBR) Tajir Dost Scheme, which imposes a fixed tax on traders and wholesalers, has been met with resistance. Traders have refused to accept this scheme, leading to protests and strikes. The government faces significant challenges in convincing them to register under the new system.

Aurangzeb appealed directly to traders, saying, "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." He stressed that avoiding taxes is no longer an option given the current economic situation.

Positive Economic Indicators

Despite these challenges, Aurangzeb pointed out some positive developments. Inflation was reduced to single digits in August, and he expressed hope that the State Bank of Pakistan would follow with a policy rate reduction. He also mentioned improvements in remittances and credit ratings.

Global rating agencies Fitch and Moody’s have upgraded Pakistan’s rating by one notch, reflecting confidence in the country's economic management. Remittances have remained steady, indicating trust from overseas Pakistanis in the government's economic policies.

Macroeconomic Stability Essential

Aurangzeb underscored the importance of achieving macroeconomic stability for long-term growth. "Macroeconomic stability is the basic hygiene that we must get right," he said. This stability is crucial for ensuring sustainable economic development and growth.

The press conference highlighted the government's uphill task of bringing traders into the tax net. Previous efforts by different governments have failed, making this a critical issue for Pakistan's economic future.

The Finance Minister's call for increased tax compliance comes at a time when Pakistan is striving for long-term economic stability amidst various challenges.