2026: Roadmap To Prosperity—II

Dr. Ikramul Haq

Many writers, institutes, and think tanks, such as Pakistan Institute of Development Economics (PIDE) and Prime Institute have been highlighting the vices of oppressive and narrow-based taxation in various reports/articles/research papers/books.

Viable solutions have also been offered to make it fair and broad-based, but the Ministry of Finance, the FBR, and foreign lenders and donors have never paid any heed.

The following need consideration if Pakistan has to achieve rapid inclusive development, ensuring prosperity for all its citizens, no matter where they reside:

• The corporate tax rate should not exceed 20%, including super tax, etc.
• Income tax rate should be lowered to maximum 10% with alternate tax of 2.5% on net wealth exceeding Rs. 100 million, whichever is higher.
• All individuals should be facilitated to file a simple income tax return [no wealth statement]—those earning below taxable limit should be paid income support [negative tax].
• Single-page return form should be in English/Urdu/all regional languages, which can even be submitted through a simple mobile app. Reporting of real income by all will help create data bank at national level of all households. Their earning levels will determine who needs to pay and who should be entitled to social benefits and how to improve social/economic mobility ending poverty trap.
• The State must end the culture of appeasement by withdrawing all exemptions and concessions to retrieve the monstrous tax expenditure of trillions of rupee and in future there should be no immunities and amnesties.
• The State must end the culture of appeasement—no more amnesties/immunities giving incentives to the dishonest and penalizing the honest. Those who filed but underpaid be offered to make up deficiency paying due tax with no penal action/audit. It will yield much more than target fixed for FBR at 12.970 trillion.
• To reduce the fiscal deficit to the level of 4% of GDP, it is imperative to (i) curtail unproductive and wasteful expenses by 30%, (ii) increase non-tax revenues by leasing out valuable state lands and assets e.g. palatial government houses etc. through public auction and for specific activities to generate employment and boost economic activity and (iii) taxes at all levels—federal, provincial and local—should be made simple, low rate, broad-based and payable with ease.
• Instead of being overburdened with advance and heavy taxes, duties and other charges businesses should be facilitated by improving ‘Ease of Doing Business’ and reducing ‘Cost of Doing Business’.
• Tax credits and incentives for investing in human resource development (HDR) and research & development (R&D) to have qualified workforce in all areas—providing employment to all and paying them as ordained in Article 3 of the Constitution.
• All possible facilities and incentives should be provided to all kinds of entrepreneurs/innovators, especially Small & Medium Enterprises (SMEs) to concentrate on innovations, growth and productivity. Banking sector must be proactive in lending to SMEs and big businesses. Banks are overwhelmingly extending loans to the government considering it as a safe bet. Banking laws need to be amended for quick disposal of disputes as done in many countries.
• Facilities should be extended to foreign investors including grant of long-term visas and/or nationality. Many Afghans and Iranians are keen to invest.
• Centralised data creation and management of all citizens to determine their economic status.
• There should be universal pension, social security/food stamps for the needy, at the same time empowering them to unshackle themselves from the trap of poverty.
• Establishment of National Tax Agency (NTA) and All Pakistan Unified Tax Services having professional expertise in all related fields. NTA would communicate to all citizens what their income/expenditure levels are—it would determine correct tax obligations and bona fide entitlement of social support from the State.
• National and provincial legislators should impose simple, predictable and low-rate taxes. Income tax on all incomes including agricultural income, should be under the exclusive domain of federal government. Unified sales tax on goods and services, to be collected by NTA, should be shared between the centre and provinces—it would ensure fiscal consolidation making the country self-reliant.
• We must abolish multiple taxes and instead collect local taxes e.g. property, vehicle taxes etc. to meet the needs of residents by allocating funds to local governments to provide services of health, education, civic amenities of all kinds, and recreation etc.
• Allocation of minimum of 4% of GDP for education and additional 2% for R&D by federal and provincial governments.
• All citizens and other entities should be given a chance to declare all untaxed assets for any past year, at home or abroad, by paying due tax liability in full or in installments to overcome cash liquidity problems—of course paying additional tax for grace period(s). After the deadline, stringent action under the law should be taken including confiscation of property, fine and/or imprisonment.

Shockingly, both IMF and FBR have ignored proposals given in Tax reforms: Agenda for Self-Sustainability for collecting Rs. 30 trillion at federal alone enabling Pakistan to overcome monstrous fiscal deficit, get rid of fresh loans, achieve rapid economic growth and provide social services to all citizens.

Failure to undertake fundamental reforms as suggested above is the real problem. The federation can easily collect taxes of Rs. 30 trillion (15% of GDP if informal economy is also included) to create adequate fiscal space to come out of the present economic mess and provide the much-needed and long-delayed benefits/entitlements to all citizens and reliefs to trade and industry.

For achieving the above levels of taxes, our focus should be on rapid and sustainable higher growth that will increase taxes as a byproduct—harsh taxation only hampers expansion and prevents investment in existing and new businesses.

The way forward is determination of fair taxation rights under the Constitution between the federation and federating units. It needs urgent reconsideration as highlighted in Pakistan’s Fiscal Crisis: NFC, Federal Overreach And The Betrayal Of Devolution,  Friday Times, December 20, 2025.

The need of the hour is to allow the provinces to raise adequate resources that would also help in overcoming overall fiscal deficit faced by the federal government. For example, Balochistan should get “net proceeds” of Excise Duty on natural gas, and Khyber Pakhtunkhwa on electricity, as envisaged in Article 161(1)(a) & (b) of the Constitution and which is presently not the case. Their current share in sales tax from 7th NFC Award is as low as 9% and 15% respectively. They have rich natural resources and wealth of oil, gas and electricity but due to low population get meagre shares for goods they produce. The same is the case for Sindh.

In view of Article 167(4), the role of National Economic Council (NEC) has become very important though it has yet not been realized by the centre and provinces. Planning in the aftermath of 18th Amendment should be federalized rather than centralized. The 18th Amendment redefined NEC on the pattern of Council of Economic Interests (CCI). The NEC forms part of Chapter 3 of the Constitution entitled ‘Special Provisions’.

Through Article 172(3) the 18th Amendment also confers 50 percent ownership of hydrocarbon petroleum resources on the provinces that needs to be implemented. Earlier the federal government held this subject. Presently, many economists and politicians are arguing that the 18th Amendment and 7th NFC Award are harming fiscal stability of Pakistan. Their argument needs consideration. The issue of 7th NFC Award vis-à-vis provisions of 18th Amendment must be examined holistically and in historic perspective.

After the 18th Amendment, right to levy wealth tax and capital gain tax on immovable assets, gift tax, inheritance tax etc. is with provinces but they are not ready to levy these on the rich and mighty. This is a common issue both at federal and provincial levels arising from absence of political will to collect income tax from the rich classes—the paltry collection of agricultural income tax—less than Rs. 3 billion by all provinces and the Centre in fiscal year 2024-25—is highly lamentable.

The way forward to sustain fiscal consolidation and ensure ease of business is one unified sales tax on goods and services, as is the case in many federations like ours, under a low rate (say 10%).

Unified sales tax on goods and services should be collected under federalized National Tax Authority, having representation of both federation and the federating units. It is also imperative that further amendments should be made in the Constitution after debate and consensus to assign right to levy tax on all kinds of income, including agricultural income, to the federal government. The share to provinces of agricultural income will be 100% as NTA will be a federalised agency, where expenditure will be met from revenues collected on pro-rata basis.

The above measures will reduce fiscal deficit at the national level. This is the only way to achieve and sustain fiscal stabilization in Pakistan. However, this can only be achieved if we also reform and merge all tax collection agencies at federal and provincial levels for which we need comprehensive structural reforms.

The FBR and all provincial tax collection agencies, after necessary reforms, should ultimately merge into single National Tax Authority, manned by officers/staff of All Pakistan Unified Tax Service (APUTS). The NTA would collect taxes at all levels to be distributed as per the Constitution. It would also disburse benefits like pension, social security, food stamps and income support etc.

The linkage of database of various bodies with NTA (complete digitization) would be a great step towards e-government that is presently non-existent, but efforts are now being initiated for achieving this goal. The mode and working of NTA can be discussed and finalized under Council of Common Interests (CCI) and its control can be placed under National Economic Council (NEC).

It is high time that federal and all provincial governments, including the representatives of Azad Jammu & Kashmir and Gilgit Baltistan, sit together under the umbrella of Inter-Provincial Coordination (IPC) Division. They should discuss the issues of federalization of economic planning that is the command of the Constitution, pool all the available resources under APUTS, and achieve fiscal consolidation to make Pakistan a prosperous country with inclusive development for all citizens and attractive place for investments—internal and external.

The above should be nation’s resolve for 2026, which can be named “2026: Year of Road to Prosperity”. Obviously, the incumbent federal and provincial governments and vested interests would not implement these unless civil society and media launch an effective campaign for it. There had been much talk about ‘charter of economy’ in Pakistan, but none of the political parties and other stakeholders ever bothered to consider the true spirit of even the 18 Amendment  after lapse of more than fifteen years.

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Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.