Pakistan Eyes Mid-Term Tax Policy by Early 2027, Minister Says

ISLAMABAD: Pakistan hopes to introduce a medium-term tax policy by the end of this year or early next year as part of its economic reform agenda, Finance Minister Muhammad Aurangzeb said on Saturday, emphasizing the need for greater predictability in taxation.

Pakistan’s tax system has long faced criticism over frequent policy shifts, a narrow tax base, and weak enforcement. The government is seeking to overhaul the system while meeting revenue targets under its $7 billion IMF bailout program, which aims to stabilize the economy and support structural reforms.

Pakistan has already introduced a multiyear tariff reform policy intended to gradually reduce import duties, especially on raw materials and intermediate goods, to lower production costs and make domestic industries more competitive. Aurangzeb cited the tariff policy as an approach the government wanted to follow in developing its medium-term tax policy.

“The medium-term tax policy, the way we have announced the tariff policy, is the way to go,” he said in televised comments while addressing an event at the Lahore University of Management Sciences. “And God willing, we are hoping that by the end of the year, early next year, we can give a medium-term tax policy as part of the reform package.”

Aurangzeb said the government had recently held a two-day workshop involving local and international experts to review tax enforcement, broaden the tax base, and transform the Federal Board of Revenue (FBR) through improvements in personnel, processes, and technology.

He said the discussions had also focused on the progress of tax reforms and how to take them forward, particularly in terms of predictability.

The government established a Tax Policy Office within the finance ministry earlier this year, separating tax policy formulation from the FBR, which remains responsible for tax administration and collection.

Aurangzeb said the office had been created to consider taxation in terms of its economic value, while acknowledging that the government still needed to meet its budgetary requirements.

He had previously announced in July that Pakistan intended to unveil a medium-term tax strategy within six months, a timeline broadly consistent with his latest remarks.

Aurangzeb also warned against returning to consumption-led economic growth, saying Pakistan needed to avoid the repeated balance-of-payments problems associated with import dependence.

“No matter how much pressure there is, we are not going to go for liquidity-fueled, consumption-led growth,” he said.

Turning to longer-term economic challenges, Aurangzeb identified climate change and rapid population growth as two existential threats to Pakistan’s development, warning of the consequences of continued population growth at 2.55 percent.

Pakistan, the world’s fifth most populous country, has struggled to expand employment opportunities, education, and health care sufficiently to meet the needs of its growing population.

Aurangzeb cited Bangladesh, Indonesia, and Iran as examples of countries that had reduced their population growth rates, identifying women’s education, greater female participation in the workforce, and engagement with religious scholars as important measures.

He said the removal of sales tax on contraceptives in the federal budget was a tactical measure rather than a substitute for addressing population growth through structural changes.

“We need to think through very structurally,” he said.

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