A top official from the Special Investment Facilitation Council (SIFC) on Saturday described Pakistan”s fiscal situation as a “mess” and labelled the corporate sector as the “easiest prey” for taxation, while unveiling a comprehensive roadmap to slash taxes, lower interest rates, and pivot the nation towards an export-led economy.
Addressing leading businesspersons, SIFC National Coordinator Lt General Sarfraz Ahmad asserted that the country”s “growth plan was missing” and urged for a national consensus to abandon economic models reliant on protection and subsidies.
During his speech at a dialogue organized by the Pakistan Business Council (PBC), Ahmad stated that the government is seriously considering a significant reduction in the corporate tax burden. “There is an absolute consensus in the government that this excessive taxation format cannot take Pakistan forward, so we have to correct it,” he declared.
The proposed reforms include cutting the corporate income tax from 29% to 25%, eliminating the inter-corporate income tax, and removing ad hoc measures like the super tax. Ahmad noted that the effective corporate tax rate, after including all levies, exceeds a “not sustainable” 50%, which discourages companies from expanding.
This statement follows a report from three weeks prior suggesting the government was also mulling a reduction in the maximum individual tax rate from 45% to 25% and cutting the sales tax from 18% to 15%.
The SIFC official also advocated for a reduction in borrowing costs, stating that the interest rate “must also be reduced” and cannot be kept permanently at 11% while inflation is decreasing. He stressed that “monetary policy must reflect ground reality,” acknowledging the “maximum pain cycle” created by a shrinking fiscal space, large circular debt, and exchange rate issues.
On the currency front, Ahmad criticized the artificial maintenance of the exchange rate, calling for a “pragmatic, competitive, market-oriented framework” that considers the nation”s vulnerabilities.
He argued that Pakistan has long followed a consumption-led and debt-prone growth model, warning that continuing on the same path would inevitably lead to the same result of seeking financial support from partners. “The choice was between the export-led and import-substituted economic growth model, and we need to create a consensus… that the export road is the solution,” he said.
The coordinator also challenged the business community, noting that some “took advantage of the broken playing field, and you made profits.” He highlighted the critical issue of capital flight, stating that wealth generated in Pakistan often finds its “final destination in the UAE, London, Singapore and New York,” with very little being reinvested locally.
This lack of domestic investment, he contended, is a primary reason for low Foreign Direct Investment (FDI), which hovers around $1.2 billion. “Until our own business community invests in Pakistan, foreign investors will not,” Ahmad added, setting a goal to at least double FDI to $2.5 billion annually.
He also emphasized the need to differentiate between “good and bad FDI,” advocating for policies that welcome investment in export-oriented sectors while discouraging it in consumption-based industries. As an example of local capital going abroad, he mentioned that FIFA World Cup footballs made by Pakistani investors will now be labelled “Made in Saudi Arabia.”
Initially created to provide a single-window for Saudi Arabian investment, the SIFC”s mandate was narrowed after the 2024 elections to focus on identifying key projects for foreign investment, correcting policies, and facilitating businesses.