Pakistan’s current tax policies are increasingly being viewed as counterproductive, stifling investment and economic growth. Key stakeholders now hope the International Monetary Fund (IMF) will allow the government fiscal space to recalibrate its tax regime, prioritising economic expansion for long-term stabilisation.
Under IMF oversight, Pakistan’s tax collections have risen sharply, with Q1FY26 reporting a 12.5% year-on-year increase. However, large sectors—including agriculture, wholesale, retail, real estate, and high-earning professionals—remain largely untaxed, leaving the burden on a small segment of formal taxpayers. Corporate taxpayers contribute around 65% of direct taxes, while salaried workers, less than 8% of the labour force, shoulder a disproportionately high share.
Prime Minister Shahbaz Sharif has directed his economic team to seek IMF approval for a proposed Rs975 billion tax-relief package aimed at boosting investment, job creation, and capital formation. Measures include reducing corporate tax from 29% to 25%, lowering maximum individual and AOP rates to 25%, cutting sales tax from 18% to 15%, abolishing the super tax, and withdrawing the Capital Value Tax.
Experts argue that predictable, lower taxes will stimulate growth, reduce brain drain, and expand the productive economy, but success depends on political will, expenditure control, and IMF alignment on the fiscal gap.
