The International Monetary Fund (IMF) has urged Pakistan to rationalise tax concessions, bring under-taxed sectors into the tax net and reduce disproportionate tax burdens to strengthen revenue collection and support private-sector growth.
Jihad Azour, Director of the IMF’s Middle East and Central Asia Department, made the remarks while opening a high-level workshop in Islamabad organised by the Ministry of Finance and Revenue. The two-day event, titled “Reforms for a Modern and Growth-Friendly Tax System in Pakistan,” brings together policymakers, tax experts and private-sector representatives to discuss reforms aimed at improving the country’s tax framework.
IMF Calls for a More Neutral and Balanced Tax System
Azour said a fairer tax system requires addressing sectors that contribute less than their potential, reviewing existing concessions and ensuring that the tax burden is distributed more evenly.
“Addressing under-taxed sectors, rationalising concessions, and reducing disproportionate burden are elements of a fair tax system,” he said.
He stressed that changes to tax policy must be accompanied by improvements in revenue administration. Without stronger implementation capacity, policy reforms alone may not produce the intended results.
A simpler and more neutral tax structure, supported by effective administration, can help improve compliance, broaden the revenue base and create a more predictable environment for businesses.
Pakistan Must Turn Economic Stabilisation Into Growth
Azour noted that Pakistan has made progress in restoring macroeconomic stability, rebuilding confidence and strengthening its external buffers. He said the next challenge is to translate these gains into stronger and more sustainable economic growth.
Earlier in October, IMF staff and Pakistani authorities reached a staff-level agreement on the fourth review of Pakistan’s $7 billion Extended Fund Facility (EFF) and the third review of the Resilience and Sustainability Facility (RSF).
Azour emphasised that achieving lasting results requires more than identifying policy changes. Governments must ensure that reforms are implemented through institutional ownership, coordination and effective communication.
“Many countries have strong reform ideas, but few translate them into durable results,” he observed, adding that implementation requires “ownership, coordination, engagement, and communication.”
Tax Policy and Revenue Administration Must Move Together
The IMF official highlighted the need to align tax policy with the institutions responsible for enforcing it. A simpler tax framework can make compliance and administration easier, while capable revenue authorities can strengthen the credibility and effectiveness of reforms.
For Pakistan, the approach involves reviewing tax concessions, broadening the tax base and reducing distortions that place unequal burdens on different sectors of the economy.
Azour said the country’s progress on stabilisation provides an opportunity to pursue transformative reforms and strengthen the foundations for sustained growth.
Workshop Focuses on Key Tax Reforms
The workshop, scheduled to continue through October 21, includes senior government officials, representatives of the IMF and World Bank, tax specialists and private-sector leaders.
Discussions cover the introduction of a unified sales tax regime, a simpler and more neutral income tax system, digitalisation, taxpayer trust and fiscal federalism.
Finance Minister Muhammad Aurangzeb also addressed the gathering, highlighting the government’s focus on tax reforms designed to support economic growth.
The discussions are expected to examine how policy changes, improved administration and stronger coordination can help Pakistan build a more efficient and equitable tax system.