IMF deal no justification to squeeze industry, stakeholders say

ISLAMABAD: The business community has urged the government not to use the International Monetary Fund programme as a justification for imposing additional pressure on industry and the public in the upcoming budget, arguing that stronger revenue collection should come from sectors that remain under-taxed rather than from documented businesses already in the tax net.

Pakistan Business Forum (PBF) Chief Organiser Ahmad Jawad said the federal budget's success would depend on whether the government could widen the tax base without further straining formal-sector businesses. Speaking on the issue, he said the decision to enter the IMF programme had been taken by the government itself and did not mean businesses and consumers had to face added fiscal pressure each year.

Jawad said Pakistan's economy has averaged about 3% growth over the past four years, which, in his view, highlighted the need for policies that promote investment, industrial activity and employment generation. He warned that if new taxes are imposed in the next budget, economic activity could weaken further at a time when growth remains fragile.

He also said the cost of doing business in Pakistan is around 34% higher than in many competing regional economies, a factor he said had hurt the ability of local industries to compete in export markets.

Concerns over business costs

According to Jawad, a written submission by the Ministry of Commerce to the National Assembly Standing Committee on Commerce identified several structural reasons for high business costs. He said these included an anti-export bias in the tax regime, limited financing access, elevated energy tariffs that reduce industrial competitiveness, and weak trade facilitation that raises compliance and transaction costs.

Jawad said the ministry's assessment supported concerns repeatedly raised by the business community and showed the need for reforms in the budget aimed at improving competitiveness, increasing exports, attracting investment and lifting economic growth.

Among the PBF's budget recommendations for June 10, he said, is the removal of the petroleum levy and its replacement with an 18% general sales tax on petroleum products, which the forum says would make the tax structure more transparent.

The forum has also called for targeted support for agriculture, especially cotton, which Jawad described as Pakistan's white gold. He said policy support was needed to revive cotton output, strengthen the textile value chain and reduce reliance on imported cotton. He added that the government should also include measures to develop the blue economy and modernise agriculture, saying both sectors hold considerable untapped potential for exports and sustainable growth.

Jawad further recommended a simplified one-page tax return in place of the current lengthy filing system, saying a simpler regime could improve compliance and help expand the tax base. Addressing Prime Minister Shehbaz Sharif, he said the business community still expected policy direction that supports growth, investment and stability.

In his remarks, Jawad said the government had to determine whether investment capital would move into industry and exports or continue flowing into real estate and speculative activity.

Experts call for tax base expansion

Growth Securities Head of Research Nasheed Malik said the need to approach the IMF reflected weaknesses in governance and fiscal management. At the same time, he said IMF-backed programmes help enforce fiscal discipline and restrain excessive spending. He added that while the lender focuses on recovering its funds and meeting programme targets, it is the government's responsibility to consider the impact of policy decisions on citizens.

Dr Jazib Mumtaz, a public finance and trade expert at IBA, said the economy had gained a measure of stability over the past four years, but the next task was to achieve durable growth. He said the government could boost economic activity by extending meaningful support to the industrial sector while preserving macroeconomic stability.

Mumtaz said revenue collection should not depend only on taxing compliant sectors more heavily. Instead, he recommended bringing under-taxed and undocumented parts of the economy into the formal tax net, including retail and wholesale trade, real estate and informal businesses.

To support exports and industrial growth, Mumtaz also suggested restoring the final tax regime for exporters, gradually withdrawing the super tax, ensuring prompt sales tax refunds and reducing corporate income tax rates.

Jawad said the upcoming budget should help restore confidence by lowering the cost of doing business, encouraging productive investment and simplifying taxation.