SDPI urges wider tax net, climate spending and relief for salaried class

ISLAMABAD: Financial experts speaking at a pre-budget session organised by the Sustainable Development Policy Institute (SDPI) on Monday called for broadening the tax base, increasing allocations for climate action and social protection, promoting job creation and easing the burden on salaried taxpayers.

With the federal budget for 2026-27 under preparation, the participants said Pakistan’s fiscal approach remains centred on managing repeated crises instead of addressing deeper structural weaknesses that, in their view, are worsening poverty, inequality and climate-related risks. They urged policymakers to shift away from short-term stabilisation and place human development, climate resilience and productive investment at the core of economic planning.

Calls for stronger social and climate investment

SDPI Deputy Executive Director (Policy) Dr Shafqat Munir Ahmad said allocations for education, health, nutrition and social protection should be protected and increased, while investment in climate adaptation and disaster preparedness should be expanded substantially.

He said the country should not continue spending on recovery after each flood, drought and heatwave while investing too little in prevention, preparedness, anticipatory action and human development. He added that the budget should be assessed not only through fiscal indicators but also by how effectively it reduces poverty, builds resilience and protects development gains.

Dr Shafqat also urged greater public investment in sectors that can generate employment, particularly agriculture, small and medium enterprises, and emerging green economy opportunities. He said social spending should be treated as an investment in productivity and economic competitiveness rather than as a fiscal liability.

Tax reform and tariff rationalisation

SDPI Deputy Executive Director (Research) Dr Sajid Amin Javed cautioned against placing additional pressure on salaried and documented taxpayers. He said formally employed individuals continue to contribute a large portion of direct taxes even as major parts of the economy remain outside the tax net.

According to Dr Javed, budget reforms should concentrate on widening the tax base and improving productivity instead of relying on revenue steps that place a heavier load on middle-income households. He also backed ongoing tariff rationalisation, saying lower tariff distortions could strengthen industrial competitiveness, attract investment and support export-led growth.

"Pakistan needs structural reforms instead of annual revenue-driven adjustments," he said speaking on the broader direction of reform.

He also said excessive dependence on indirect taxes weakens purchasing power and limits economic activity.

Budget as a development strategy

SDPI Research Fellow Dr Khalid Waleed said the budget should provide a pathway for economic transformation rather than merely balancing accounts. In his view, fiscal policy should support employment, productive investment and human capital development.

"A budget is not meant to be a calculator with a flag on it; it is meant to be a development strategy expressed in rupees," he said.

While welcoming climate budget tagging, Dr Waleed warned that it should not become a procedural exercise disconnected from actual spending choices. He said climate risks should be incorporated into fiscal planning, development expenditure and public investment decisions.

He also called for stronger incentives for renewable energy and warned that inconsistent policies could deter investment in the clean energy sector. Referring to climate budget tagging, he said that "Climate budget tagging must be inclusive, not just a box-ticking activity."