KARACHI: Muhammad Aurangzeb Federal Minister for Finance and Revenue on Tuesday warned the country can’t continue to raise taxes for business community and salaried class and emphasized to bring the untaxed sectors into the economy and ensure effective enforcement of taxation laws. He reiterated the resolve to tax the agriculture sector after all chief ministers agreed to carry out legislation for it.

Addressing members of the Karachi Chambers of Commerce & Industry, the finance minister showed his surprise as to why the industry and International Monetary Fund (IMF) are not willing to accept the government’s intentions to tax the agriculture sector, which is largely untaxed so far. “Our hand has now been forced because we have reached a level that if we don’t expand the net and bring the under-taxed, untaxed sectors into the economy, we are at the end of the road,” he said.

He noted that enhanced taxes, particularly for salaried class, were a short-term measure but definitely not something easy. “We raised taxes for business community and salaried class this year but we cannot do it again and again as they all are excessively overburdened, therefore, all other untaxed sectors including retailers, agriculture, real estate sectors, etc, have to be brought into the tax net to reduce the burden on existing taxpayers,” he added while appreciating all the chief ministers for agreeing to bring in legislation for taxing the agricultural sector, which was currently a provincial subject.

Aurangzeb said that efforts were being made to attain macroeconomic stability for sustainable growth because if the government, without attaining macroeconomic stability, takes growth-oriented steps which was done in the past, it would face balance of payment issue, so there was no choice but to take difficult decisions for macroeconomic stability which, when achieved, would reduce the burden on business community as well as the salaried class.

He said the economy faces structural issues as whenever attempts were made to accelerate growth, it caused balance of payment problem. “It is a fundamental issue and we have to get out of it. We can only go for growth when we have enough fiscal space which should be export-led. In this regard, the business community, exporters and the value-added sector have to play a role.”

Commenting on State Bank’s decision to cut interest rate by 1 percent, he said that it was a step in the right direction and keeping in view the inflation, even if it goes up to some extent, the SBP will still have enough room to gradually bring down the interest rate further. “In addition to high interest rates, the business community suffers badly due to high taxes and energy tariffs which have all come together but the government was cognizant of all these issues. The business community rightly demands competitive energy tariffs but relief can only be provided according to available fiscal space,” he added. Referring to his discussions with banks, the finance minister said that banks have been advised to give maximum lending to private sector, particularly the farmers and SMEs who have to lead the country. Credit has to be provided to private sector on cash flow basis, not on collateral basis which was being done by several banks whereas the other banks must also do the same. He further said that all determined tax refunds up to June 30, 2024 summing up to a total of Rs51 billion were released to the industries on July 1, 2024 and if duty drawbacks were also included, the overall refunds would go up to $70 billion. “If we hold these refunds, these raise liquidity cost for industries as they acquire working capital at the rate of around 20 percent that is an addition to cost of doing business,” he said and assured that under clear guidance by the prime minister, the government will not hold refunds for 8 to 10 months and these would be released immediately after determination.

Commenting on the misconception about numerous free-of-cost facilities being provided to ministers, he said, “I want to make a very categorical statement that I don’t take salary and I along with all the ministers present at KCCI today pay our bills from our own pockets. At least at the federal level, we have to reduce our expenditures.”

He said that during Imran Khan’s government, Dr Ishrat Hussain presented a report on how to right-size the government but unfortunately that report, which was a very good effort, never saw light of the day. The right-sizing committee, under PM’s supervision, was reviewing the expenditures of all the ministries and entities, which would be gradually devolved or merged under an effective implementation plan to be announced by the prime minister.

He stressed that if Pakistan can achieve agriculture exports of $8 billion and IT exports of $3.2 billion, then the relevant businessmen must look forward to achieving agricultural exports of $10 billion and IT exports of $5 billion.