Tax System Impeding Economic Growth, says Mian Zahid Hussain

The Chairman of the National Business Group Pakistan, Mian Zahid Hussain, has stated that the existing taxation framework in Pakistan significantly impedes economic advancement, thereby limiting both innovation and entrepreneurial activities.

He added that the intricacies and inefficiencies inherent within the tax structure foster a tough environment for enterprises, curtailing their capacity for both prosperity and expansion.

Mian Zahid Hussain commented that the deficiencies of the current system undermine dynamic economic development, leaving substantial potential unexploited. He noted the system’s basis in inequality, which fosters budgetary shortfalls, mounting debts, and instability in the balance of payments. He also mentioned the IMF’s pressure on the government to curtail the budget deficit and establish a primary surplus as part of a $7 billion loan arrangement.

He cautioned that the financial load might disproportionately affect salaried employees and the corporate sector, a detail warranting significant attention. The initial tax revenue objective for the present fiscal year was set at PKR 12.9 trillion but was subsequently adjusted to PKR 12.3 trillion, anticipating a deficit potentially reaching PKR 1 trillion. He suggested that implementing supplementary taxes appears unavoidable to compensate for this difference, with projections estimating the upcoming fiscal year’s tax target at PKR 14.3 trillion.

The IMF is urging for greater revenue generation in the forthcoming budget. However, it is uncertain if the government will persist in taxing already compliant sectors or address influential groups, such as those in retail, real estate, and agriculture, that have historically avoided taxation.

Mian Zahid Hussain emphasized that to alleviate the tax burden on the public and salaried individuals, the government should eliminate superfluous tax exemptions and pursue tax evaders. He also highlighted the necessity of resolving losses from state-owned enterprises, as well as the power and gas industries, which are burdening public finances.

While acknowledging resistance to tax reform from specific industrial and trade bodies, he urged the government to facilitate discussions with these entities and integrate them into the taxation system.

He additionally promoted the comprehensive digitalisation of all commercial transactions to reduce tax avoidance and enhance adherence. This initiative would necessitate the involvement of all relevant parties.

The business leader asserted that the repeated targeting of the salaried class must cease. Instead, the government should concentrate on individuals who generate substantial income but contribute negligibly to national progress. Mian Zahid concluded that an equitable and consistent tax policy is crucial for promoting both fairness and economic stability, stating that sustainable development in Pakistan can only be guaranteed through a non-discriminatory taxation system where all citizens contribute relative to their earnings.