ISLAMABAD: Prime Minister Shehbaz Sharif on Wednesday stressed the need to reduce direct taxes in the forthcoming federal budget, warning that sustainable economic growth cannot be achieved by continuously increasing the tax burden on businesses and investors.
Addressing the inaugural session of the Pakistan Governance Forum 2026 in Islamabad, the prime minister questioned the viability of stretching the existing taxation framework any further.
“How long can we keep stretching this? Unless there is growth, unless production and exports increase, and unless you invest and attract foreign direct investment, how much more tax can you continue to impose?” he asked.
The prime minister said that in the upcoming federal budget, expected in the coming months, the government would need to cut direct taxes across the board.
The primary objective, he explained, was to facilitate the business community and restore investor confidence.
He added that entrepreneurs and investors must feel assured that their capital would not be eroded by excessive taxation.While advocating tax cuts, the premier underlined the importance of broadening the tax net.
He noted that due to various initiatives, Pakistan’s tax-to-GDP ratio had reached 10.5 percent. However, he emphasised that expanding the tax base was more critical than increasing rates on existing taxpayers.
He also called for a reduction in indirect taxes in the upcoming fiscal budget, highlighting that such taxes disproportionately impact consumers and end users.
The prime minister regretted that in many cases, indirect taxes collected from the public were not being deposited into the national exchequer, terming it a “huge injustice” to the nation.
Referring to Pakistan’s recent economic challenges, the prime minister recalled that in June 2023 the country was on the verge of default.
However, through what he described as collective efforts by the federal and provincial governments as well as the military leadership, the macroeconomic situation stabilised within two years.
He pointed out that inflation, which had been hovering around 35 percent at the time, had been brought down to below 7 percent.
The policy rate was also reduced to 10.5 percent, reflecting improved macroeconomic stability.
He stressed that exports must be increased gradually, given Pakistan’s significant untapped potential in global markets.
The prime minister clarified that several key reforms introduced by the government were home-grown and not driven by the International Monetary Fund.
He said these reforms were essential to prevent the recurring boom-and-bust cycles that had historically plagued the economy.
In the power sector, he noted that electricity prices had been reduced by Rs9 per unit while ensuring that investments in solar energy remained protected. He commended the minister for power and his team for their efforts in achieving these reforms.
However, he expressed concern that the country continued to suffer losses of Rs200 billion annually due to power theft, stressing that only a whole-of-government approach could address the issue effectively.
The prime minister also defended the closure of certain state-run entities, including Utility Stores and the Pakistan Works Department (PWD), describing them as institutions tainted with corruption.
He said shutting down these departments had saved billions of rupees for the national treasury.
Highlighting social welfare measures, the premier said that under the government’s Ramazan Package, Rs38 billion was being distributed to deserving individuals through digital wallets in a transparent and dignified manner.
The ceremony was attended by chief ministers, federal and provincial ministers, experts, diplomats, investors, businessmen, traders, and senior officials.
Emphasising collective efforts, the prime minister acknowledged that the journey toward sustained economic growth would be long and challenging but reaffirmed the government’s resolve.
“It is not the job of the government to run businesses,” he said, reiterating that the state’s role was to facilitate the private sector, exporters, and investors while creating an enabling environment for productivity and growth.
The government, he added, was offering diverse incentives to exporters, investors, and businessmen to strengthen Pakistan’s economic foundation and secure its rightful place in the global economy.