IMF country head urges Pakistan to broaden tax base and simplify system
IMF Pakistan representative Mahir Binici called for a broader, simpler, fairer and more predictable tax system. He said Pakistan needs revenue of at least around 15 per cent of GDP and is still far from that level.
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- IMF's Mahir Binici urged a broader, simpler, fairer and more predictable tax system
- He said Pakistan needs revenue of at least around 15 per cent of GDP
- He named governance, tariff policy and cost of doing business as key growth areas
The International Monetary Fund on Thursday called for a broader, simpler, fairer and more predictable taxation system in Pakistan, to generate resources for human capital, infrastructure and investment. The IMF says this would help raise Pakistan's potential GDP and improve living standards.
IMF Pakistan representative Dr Mahir Binici made the remarks at a session of the SDPI 29th Sustainable Development Conference, organised by the Ministry of Finance. According to The Express Tribune, he praised Pakistan's efforts to maintain economic stability amid recent global and domestic challenges.
"We need a broader, simpler, fairer and more predictable taxation system," Binici said. He added that it would enable higher revenue "not only for the sake of increasing revenue but also generating the resources that the country needs, whether for human capital, infrastructure or investment".
Binici said the IMF's research shows emerging economies like Pakistan need revenue of at least around 15 per cent of GDP as a threshold. He said Pakistan is still far from that level, adding: "It is still, I think, far below our peers and what Pakistan needs, but there has been some gradual progress."
He said Pakistan had reached a critical juncture where discussion must move beyond taxation to how reforms translate into investment, economic activity, exports, employment and living standards. He outlined five key areas that could improve growth prospects.
Binici said fiscal and external sustainability, along with adequate buffers, are essential to a strong macroeconomic foundation, and that fiscal discipline must be supported by price stability. He cited the recent Middle East conflict, recurring climate-related shocks and global uncertainty over trade, tariffs and geopolitics as challenges.
He identified governance, the national tariff policy and the cost of doing business as key areas for a significant growth dividend. He commended the authorities for completing the Governance and Corruption Diagnostic and preparing an economic governance reform plan.
Binici also said spending on health and education had risen from around two per cent of GDP over the past two to three years, and that he intends to raise it to between 2.8 and 3 per cent in the current fiscal year. The Express Tribune noted the IMF has repeatedly raised concerns over Pakistan's tax system and slow structural reforms.
Background
khabr.pk reported on 3 November that the IMF had expressed concern over a decline in Pakistan's tax revenue and proposed emergency measures if targets keep being missed. Sources said the shortfall was Rs129 billion in October.
Why it matters for Pakistan
Tax policy shapes the federal budget, prices and the conditions attached to Pakistan's IMF loan, which affect households and businesses. The IMF says a broader base is meant to fund infrastructure, health and education. Binici said Pakistan's revenue is still far below the level the Fund considers necessary.
