LCCI Foresees Hard Times, Pushes for Fair Tax Reforms
ISLAMABAD — Pakistan’s economy is heading into a difficult year, with fiscal year 2025-26 expected to present serious challenges, warned Ali Imran Asif, Senior Executive Committee Member of the Lahore Chamber of Commerce and Industry (LCCI).
Asif cautioned that although the Federal Board of Revenue (FBR) has improved tax collections, the gains are largely coming from higher taxes on existing taxpayers rather than through expansion of the tax base. With government spending continuing to rise, meeting the fiscal deficit target of 3.9% set for the year could prove difficult.
He highlighted that Pakistan remains under close scrutiny from the International Monetary Fund (IMF), which is monitoring adherence to fiscal discipline. Despite being a populous nation with significant resources, he noted, the country is not advancing at the pace needed for sustainable growth.
“We are moving in the right direction in certain areas, but not fast enough. Unless all sectors of the economy progress together with urgency, sustainable development will remain out of reach,” Asif said. He called for a more balanced taxation policy that does not continue to burden already documented sectors while leaving large parts of the economy untaxed.
Other business leaders echoed similar concerns. Muhammad Riaz, representing the export sector, pointed out that FBR’s record collections are being achieved despite a shrinking industrial base, as manufacturers face crippling electricity tariffs, unreliable gas supply, and rupee volatility.
Pakistan’s exports stood at $32 billion last year—far below potential—while Bangladesh, with a smaller population, managed exports worth over $48 billion. Economists attribute Pakistan’s weaker performance to high production costs and an uneven tax structure.
“When the tax system extracts more from those already in the net but fails to bring the vast informal economy into documentation, it creates an unfair and uncompetitive environment,” said Ahmad Raza, an international trader.
Industry stakeholders argue that broadening the tax base by including untaxed sectors such as wholesale markets, real estate, and parts of the services industry could yield substantial revenue without placing additional pressure on compliant businesses. They further urged the government to curb unnecessary expenditures, particularly administrative costs and losses from state-owned enterprises, so that austerity measures are shared by the public sector and not imposed solely on taxpayers.
The business community believes that expanding the tax net and leveraging modern technology to track untaxed income streams would create a fairer system and rebuild trust. However, concerns remain that FY 2025-26 could bring more of the same issues: over-reliance on indirect taxes, a narrow tax base, and an FBR more focused on meeting IMF benchmarks than introducing progressive and equitable reforms.