Summary They stress that the upcoming federal budget should prioritise widening the tax base, rationalising exemptions estimated at Rs443b, strengthening property and wealth taxation
ISLAMABAD (APP) - Experts at a pre-budget policy dialogue called for urgent structural reforms in Pakistan’s taxation system, warning that slow economic growth, rising inflation, and external sector pressures could push about 1.5 million additional people into poverty under an extreme scenario if corrective fiscal measures were not taken in the upcoming federal budget.
The dialogue, titled “Towards a Fair, Equitable, Broad-based Tax System,” was organised by Sustainable Development Policy Institute (SDPI) here on Monday.
Speaking on the occasion, SDPI Executive Director Dr Abid Qaiyum Suleri said that Pakistan’s fiscal framework required a decisive shift toward equitable and progressive taxation to ensure sustainable economic growth and social protection.
He emphasised that the forthcoming federal budget presented a critical opportunity for policymakers to expand the tax base, rationalise exemptions, and reduce reliance on indirect taxation that disproportionately affects lower-income segments of society.
Stressing the need for integrating climate resilience and disaster preparedness into fiscal planning, he said anticipatory investment significantly reduces recovery costs following natural disasters.
SDPI Deputy Executive Director Dr Sajid Amin Javed said Pakistan’s GDP growth for the current fiscal year is now expected to remain between 3.3 and 3.7 per cent, which is lower than earlier projections.
He warned that energy price shocks could increase the country’s oil import bill by around $6 billion over the coming year, and inflation could rise to between 11 and 13 per cent in the next fiscal year.
These pressures, he added, could push “between one and 1.5 million additional people below the poverty line” under an extreme scenario if appropriate policy measures were not taken in time.
Highlighting structural imbalances in the taxation framework, he emphasised to bring about for reforms in taxes to ensure fairness and efficiency.
Asif Rasool, the Chief of Income Tax Policy at Federal Board of Revenue (FBR), said that improving documentation of the economy remained essential for strengthening revenue mobilization and ensuring transparency in the taxation system. He emphasized the importance of coordinated efforts between federal and provincial authorities to expand the tax net and reduce reliance on indirect taxation through enhanced enforcement and digitalization measures.
SDPI Deputy Executive Director Dr. Shafqat Munir called for integrating climate preparedness and anticipatory actions into national budget planning. Referring $30 billion losses caused by devastating floods in 2022, he said international evidence suggested that every dollar invested in disaster preparedness or anticipatory actions could save between four and seven dollars in response and recovery costs.
SDPI Energy economist Dr Khalid Waleed pointed out that Pakistan’s electricity generation remained vulnerable to imported fuel shocks, noting that about 13 per cent of electricity generation in 2026 was projected to rely on RLNG.
SDPI Research Fellow Dr. Irfan Chatha highlighted the importance of strengthening small and medium enterprises through improved access to financing and rationalized taxation policies.
He said SMEs played a critical role in employment generation and export growth but continued to face challenges due to high borrowing costs, rising energy prices, and compliance burdens. He emphasized that targeted incentives and simplified procedures could help enhance SME participation in the formal economy.
During the question-and-answer session, the speakers also discussed widening income inequality in the country, noting that the top 10 per cent of the population controlled nearly 55 to 60 per cent of total income and held around 45 per cent of national wealth, while the wealth of the top one percent exceeded that of the bottom 50 per cent combined.
The speakers emphasized that the upcoming federal budget should prioritize widening the tax base, rationalizing exemptions estimated at Rs443 billion, strengthening property and wealth taxation, supporting SMEs and exporters, and integrating climate resilience into fiscal planning to ensure sustainable and inclusive economic growth.
