Pakistan's Finance Minister Outlines Tax Reforms, Economic Strategy

Pakistan's Finance Minister, Muhammad Aurangzeb, announced the launch of the Tax Asaan Scheme for traders, describing it as a "paradigm shift" in the government's efforts to expand the tax net. The scheme introduces a 1% tax rate for traders, marking a foundational step in a broader framework.

Aurangzeb detailed a new operating model for tax collection designed to minimize "human intervention." This model will limit the discretionary powers of income tax officers, with a Central Processing Unit overseeing operations. The unit will utilize comprehensive data compiled from third-party sources and tax records to identify and address issues.

The minister stated that the public had generally welcomed the budget, aligning with the government's objective to accelerate economic growth. While taxes were imposed for FY2024-25 and FY2025-26, no new taxes were introduced this year. The government plans to concentrate on enforcement and compliance, expanding a digital product monitoring system, which was first implemented in the sugar sector at the request of Prime Minister Shehbaz Sharif, to include beverages, textiles, and other sectors.

Addressing the potential of the freelancing community, Aurangzeb highlighted that Pakistani freelancers, currently earning $10-12 per hour for coding, could increase their earnings to $50-250 per hour through upskilling in blockchain technology. This initiative is viewed within the broader context of Web 3.0, artificial intelligence, and cryptocurrency, all built upon blockchain.

Regarding cryptocurrency, the minister clarified that the government is working towards turning it into a regulated activity and moving towards tokenisation.

Aurangzeb welcomed the recent US-Iran deal, calling it a "welcome development" that created a "positive sentiment" in global markets. He noted a subsequent fall in global oil prices to $80 per barrel, with the government aiming to pass on these benefits to the public. Pakistan is also in discussions with the US about expanding their partnership following the agreement, and if sanctions on Iran are lifted, Pakistan intends to move swiftly to strengthen its economy.

For the fiscal year 2026-27, the economy is projected to grow by 4%, with an average inflation rate of 8.2%. The minister acknowledged that the closure of the Afghanistan border has negatively impacted exports and the country's export-led growth strategy, suggesting a potential "huge upside" if the Taliban government acts responsibly.

Responding to claims of concealed budget details, Aurangzeb rejected the allegations, stating that all details were finalized through consensus and the government remains open to further inquiries. He also reported that the debt-to-GDP ratio has decreased to 70%, with external debt now at $96-97 billion. Approximately 40-45% of this external debt was borrowed from international lenders, with the remainder from friendly countries like China.

The Roshan Digital Account has attracted over $300 million in investments from overseas Pakistanis in May. To address poverty, funds for the Benazir Income Support Programme have been increased to Rs838 billion. Tax revenues are projected to double from Rs7 trillion in 2025 to Rs13 trillion in 2026.

Regarding the Khyber Pakhtunkhwa government's demand for development spending cuts linked to approval from the PTI founder, Aurangzeb stated that the province, in principle, had no issue and had supported the IMF program. He noted that the Prime Minister holds the authority for such a decision.

Last week, Aurangzeb presented the FY2026-27 budget in the National Assembly, with an outlay of Rs18.8 trillion, including Rs8,045 billion allocated for markup payments.

(Source: Dawn Pakistan)