PTI will reform FBR and increase the tax net through a robust tax policy, efficient tax administration structure and effective enforcement mechanism.
Pakistan’s current Tax to GDP ratio is significantly less than the ratio required to sustain our growing fiscal expenditure and to pay-off the massive national debt accumulated over the last decade. Further to which, our tax policies have consistently been suboptimal and as a result have led to:
- Decrease in the tax net
- Disproportionately higher share of indirect taxes (60%) in tax revenue, which adds to income inequality
- High average tax rate of 31% for businesses and corporations
As part of FBR reform, we will:
- Increase FBRs autonomy by reducing the influence of Ministry of Finance and will ensure FBR is performance managed.
- Champion the shift towards direct taxation as the primary source of tax revenue as opposed to indirect taxes.
- Incentivise businesses to become a part of the formal economy, thus adding larger sources of tax income to the national exchequer.
- Champion sustainable initiatives to reduce taxes on businesses.
- Simplify tax assessment rules for corporations and small businesses.
- Integrate tax registration with associated processes to reduce the transaction cost of paying taxes.
- Improve audits by establishing risk engines and smart algorithms to identify potential taxpayers for audit.
- Improve enforcement through a robust standardised escalation process to ensure follow through of every non-payment.
- Publish names of non-compliant debtors and strongly pursue large tax evaders.
- Crack down on corrupt practices that promote tax evasion.
PTI will strengthen the labour market and create 10 million jobs over 5 years in key sectors: SME, housing, ICT, health, education, green economy and tourism.
Article 38 of the constitution states that the “state shall provide for all citizens, within the available resources of the country, facilities for work and adequate livelihood”. Approximately two million additional youth enter the labour force each year, which totals to 10 million over the next 5 years. We believe Pakistan’s youth can become its biggest asset. However, if we do not take action, the youth dividend can also become our biggest challenge and lead to drastic economic and social consequences.
To fulfil our commitment of creating 10 million jobs and strengthen the Labour market we will:
- Create 10 million jobs through cross-cutting initiatives led by the private sector.
- Ensure that each economic development initiative explicitly specifies and contributes towards the “10 Million jobs” agenda.
- Create a labour exchange to strengthen and effectively regulate the labour market along with a job placement mechanism supported by public-private partnerships to improve skills matching.
- Crack down on corrupt and other illegal practices that deny employees social welfare.
- Social welfare of workers will be ensured by the state without putting any additional burden on businesses.
- Legislate further and enact laws and regulations with strict enforcement against workplace harassment and denying minimum wage.
- Implement a technical and vocational education reform programme for upskilling our labour force in demand-driven trades.
- Upgrade existing and build new technical education universities by engaging world-class institutions as partners.
- Create a business and investor-friendly environment for investments in human capital and professional development.
- Ensure that economic development initiatives will offer Employment Guarantee Schemes for the Bottom-of-the-Pyramid with focus on women and rural areas.
PTI will play the role of an enabler and facilitator, but not developer, to build 5 million low cost housing units. We will ensure the development of 1.5 to 2 million urban and 3 to 3.5 million rural housing units.
Pakistan is currently facing an overall housing backlog of between 11-12 million housing units. The urban housing shortage is estimated to be 4 million housing units, while rural backlog is between 7 to 8 million housing units. The people at the Bottom-of-Pyramid largely live in illegal habitat, squatter settlements, and slums (Katchi Abadis); while low-income segments live in indecent housing. On the housing finance side, the situation is disappointing as we stand at the bottom in terms of Mortgage Debt to GDP Ratio when compared to region. Further to this, there is no framework in place which incentivises allied industries to facilitate the development of our housing market.
In order to implement our Housing policy we will:
- Implement a policy framework to build housing units for the low and lower-middle income segments only.
- Provide fiscal and regulatory incentives to resolve demand and supply side issues of low-income housing; which will also include incentives for allied industries.
- Strengthen the role of academia, specialised housing finance companies, building control authorities and Association of Builders and Developers of Pakistan.
- Introduce slums rehabilitation and resettlement programme to ensure decent habitat.
- Discourage sprawling and shift towards high rise buildings without compromising on environment standards.
- Provide incentives to households including partial tax offsets against income on interest and debt payments.
- Rationalise “Services Tax” levied on developers on low cost housing development.
- Allocate housing units to Persons with Disabilities (PwDs).
PTI will put Pakistan in the top 100 economies of the world according to the World Bank’s doing business rankings in five years.
Pakistan’s Ease of Doing Business Ranking has plummeted from 107 to 147 since 2013. This low ranking is primarily driven by weak and cumbersome processes to establish and do business which is further exacerbated by corrupt practices and incompetent management by relevant institutions.
In order to make Pakistan business-friendly, we will
- Further digitization of processes to make doing business easier.
- Increase ease of business through process improvements by compressing timelines for provision of basic amenities and by reducing the frequency of tax payments while retaining the amount of payable tax.
- Digitise all remaining land records and automate processes for property registration.
- Digitise court orders linked to property cases to reduce fiduciary risk to investors.
- Champion initiatives to steady supply of electricity and other basic amenities to industries.
- Increase transparency and quality of public sector customs service and reduce transit delays.
- Improve logistics infrastructure, specially related to railway cargo and container terminals.
- Reduce red tape culture through online filing of documents, especially to improve turnaround time for routine and permit approvals.
- Dedicate courts for commercial contract enforcement.
Unlike previous governments, PTI is committed to delivering an industrial strategy that contributes to growth and employment, and encourages SMEs to scale up and move toward value-added exports.
Pakistan’s manufacturing sector is uncompetitive in the region and lacks the requisite infrastructure to sustain growth and explore new avenues. Not only is doing business-as-usual difficult but the energy cost is high, tax policy is detrimental, monetary policy is suboptimal, technology is obsolete and our human capital skill level is low which contributes to low productivity, lesser innovation and a slower growth rate.
We will establish pilot SME Incubators across Pakistan with:
- Improved access to funding
- Advanced technology to facilitate innovation
- Efficient transport & warehousing facilities
- Partners for Joint Ventures
- Cost sharing solutions
- Technical assistance on tax, legal and regulatory compliance
We will launch a ten-year incentive plan for rapid growth of the SME sector including tax holiday on new investments for the first 3 years and 50% tax rate in next 7 years, and a withdrawal of minimum tax on turnover for the first 3 years and then tax at half the rate for the following 2 years.
We will transform export processing zones with leaner processes and upgraded infrastructure.
We will ensure that export oriented sectors and allied industries will be 100% zero rated and install a mechanism for faster refunds on income and sales tax.
We will facilitate imports of manufacturing inputs (e.g. synthetic fibre) at low tariffs.
We will encourage higher value-added exports in Sunshine sectors (agriculture, garments, light engineering).
We will introduce cascading tariffs on raw materials, intermediates and finished goods to move production towards value-added exports.
PTI will turnaround State-Owned Enterprises (SOEs) by creating a wealth fund, aggressive depoliticisation and through effective performance management of capable and autonomous leadership.
Pakistan’s SOEs are perpetual loss-making entities. There are over 200 SOEs which are collectively making a loss of over PKR 650 billion annually, with majority losses coming from a few select enterprises such as PIA, Pakistan Railways and Pakistan Steel. This poor performance is a result of an ailing infrastructure, politicised leadership, poor policies and management.
In order to turnaround SOEs, we will:
- Remove SOEs under the purview of line ministries to initiate depoliticisation.
- Corporatise all SOEs and transfer ownership to a wealth fund, modelled along the lines of Khazanah in Malaysia.
We will launch transformation programme for SoEs by:
- Appointing and empowering non-political and autonomous boards
- Signing performance contracts with boards and agreeing on KPIs
- Selecting outstanding professional CEOs on merit through boards
- Offering performance linked compensation to management
- Committing to zero political interference in operations of SOEs.
We will develop time-bound turnaround plans through management and review progress on routine basis.
PTI will complete electrification of rural areas, solve circular debt issue through reducing transmission and distribution losses, and implement our plan to harness our natural resources towards a greener energy mix.
Power outages are still common and the primary problem lies in the transmission and distribution of electricity due to heavy line losses and power theft. An accumulation of these losses, system inefficiencies, management incompetence and power theft has resulted in doubling of our circular debt to over PKR 1 trillion which is passed on to the consumer. Further to this, there is still a dire need to reduce dependence on energy imports for power generation to improve our balance of payments and shift towards “greener and sustainable” alternatives such solar, wind or hydropower.
In order to meet Pakistan’s energy challenge we will:
- Shift away from rent seeking models to increase system efficiency.
- Complete rural electrification through renewable and off-grid solutions.
- Transition towards “power exchange”, allowing more efficient technologies to get precedence in dispatch.
- Continue to support the expansion and utilization of indigenous coal, primarily Thar Coal.
- Revive oil & gas exploration.
- Champion and expand net metering and solarisation of houses.
We will create solid two-way linkages with China and promote an indigenous resource focused growth strategy to leverage trade infrastructure of CPEC and OBOR.
CPEC is Pakistan’s golden opportunity to resurface and complete its economic turnaround. Even though CPEC is in its inception phase, it is imperative for us to establish a solid and transparent foundation for a truly empowering corridor with two-way linkages. Currently, Pakistan is not fully benefiting from CPEC related investments due to insufficient transfer of knowledge and capabilities, lesser partnerships with local businesses and our high dependence on imports of goods and services from China.
We will ensure the completion of CPEC but encourage a shift towards partnerships for project completion.
We will utilise expertise from China to supplement domestic manufacturing capabilities and enhance yields in agriculture.
We will create more opportunities to promote local value-addition through Joint Ventures and by offering incentives for value-added exports.
We will facilitate the integration of Pakistani manufacturers in global value chains.
We will ensure that local Pakistani businesses are fully involved in implementation of CPEC project and policy.
We will improve and implement State Bank of Pakistan’s National Financial Inclusion Strategy, drastically increase access to finance, increase deposit base of banks and establish an infrastructure lending bank for large projects.
Pakistan ranks low on financial inclusion; only 23% of Pakistanis have a bank account and thus access to formal and regulated finance is poor. Further to this, despite effective administration and a robust policy framework of the State Bank of Pakistan; prevalence of informal credit is high and innovation in our banking product and services is insufficient to uplift financial inclusion. There is a strong demand for easy access to innovative financial instruments, both from citizens and businesses, which can be met with manageable risk exposure. However, supply is constraint due to market uncertainty, which increases risk and inefficient delivery mechanisms which hampers ease-of-access.
We will improve and implement the State Bank of Pakistan’s National Financial Inclusion Strategy for easier access to finance.
We will have State Bank of Pakistan develop policies to increase bank deposit base from 30% to 50% of GDP to encourage higher savings.
We will champion digital financial services efforts to encourage shift towards a cashless economy.
We will incentivise development and delivery of innovative financial instruments and services.
We will establish Infrastructure Lending Bank (IPDF model) to fund large projects (e.g. Bhasha Dam).
PTI will turnaround the tourism industry to improve Pakistan’s international image and increase its direct contribution to GDP.
Tourism in Pakistan has undoubtedly immense potential given our diverse culture, heritage and natural endowment. However, for now it is a missed opportunity owing to multiple reasons including the war-on-terror, minimal marketing, poor public and private sector infrastructure and services.
In order to boost tourism we will:
- Promote and position Pakistan as “Asia’s Best Kept Secret” in the global tourism market.
- Champion tourism in places including and beyond the northern areas of Pakistan – especially along the Indus and the historic Sufi sites of Punjab, Sindh and Balochistan.
- Develop 20 new tourist destinations in 5 years; 4 each year.
- Implement a framework to incentivise private sector investments in upgradation and development of new facilities which in particular would encourage “themed” tourism such as eco-tourism and other special incentives.
- Open all government guest houses to the public.
- Undertake the uplift of our accommodation infrastructure and transport services across all, from hostels to 5 star facilities.
- Aggressively encourage entrepreneurship, especially by SMEs, to boost economic value and job creation in the tourism industry.
- Improve processes to issue tourist visas, in particular for groups and champion initiatives, which strengthen our visa on arrival programme.
- Eliminate NOC condition for high potential tourist destinations (as has already happened in Malakand).
- Support TVET curriculum and institute development to upskill human capital in hospitality to fill the supply side deficit of skilled labour.
PTI will champion Pakistan’s journey towards a knowledge economy, digitisation and boost the IT exports with a cross-cutting strategy driven from the centre, improved infrastructure, uplifting our human capital, supportive tax policies, incentivising innovation and encouraging entrepreneurship.
Pakistan’s ICT sector and exports have shown consistent growth in recent years. However, the IT sector stands far from its potential and our exports hovers around USD 2 billion. Whereas, India has rapidly increased its ICT exports to over USD 126 billion. The primary reason is that Pakistan is uncompetitive in international market due to the repressive policies enforced by FBR along with lack of quality human resource, IT infrastructure, government sponsorship and innovation.
We will establish a Knowledge Economy Authority with cross-sectional powers across government departments to end our fragmented approach and adopt a central strategic direction towards digitisation.
We will launch the Digital Transformation Initiative Programme for digital infrastructure, citizen services and other e-government programs.
We will create and implement the National Digital Policy to ensure privacy, security, standardisation and data sharing across all stakeholders.
We will create and implement a regulatory and legal framework to enable Open Government Data and platform for shared services.
We will establish a National Outreach Scholarship Programme to identify our best minds and fully fund their placement in the top institutions.
We will increase access to international markets with a favourable visa regime and improved business development through our embassies to boost exports.
We will ensure a forward looking regulatory and tax regime to make room for new business models and innovation.
We will boost start-up development with an empowered ecosystem offering access to venture capital and tax benefits such as sales tax rationalisation and minimum withholding tax.
We will create special courts and dispute resolution forums to resolve intellectual property matters and copyrights.
PTI would implement structural changes to the existing and outdated system to create a comprehensive and integrated approach to improve our balance of payments, drive innovation and diversify our exports.
Pakistan’s international trade is on a very fragile footing; with 70% exports coming from only three types of products (textile, rice & leather) whereas our imports are mostly inelastic such as oil. This situation adds to our current account deficit and puts serious pressure on our foreign exchange reserves which will further force devaluation and add to inflation. All previous strategic trade policies and initiatives have failed to enhance exports due to Pakistan’s poor investment climate and absence of required leverage over our main export drivers.
We will ensure cohesiveness between revenue policy, trade policy & national industrial policies.
We will ensure that our foreign exchange rate is regulated based on economic fundamentals.
We will champion diversification of our export product suite.
We will increase our export destinations through economic diplomacy and institutional support while adhering to our commitments within the GATT/ WTO framework.
We will reassess FTAs and PTAs premised on principles of our national interest.
We will incentivise linkages between academia, research institutions and industry to improve technology and innovation in our exports.
We will champion and incentivise creation of regional supply chain linkages; focus will be on increasing regional trade.
PTI will make Pakistan’s textile industry more competitive to boost exports and regain its position in the international markets.
Pakistan’s textile sector has experienced a consistent downgrade over the last 5 years. The sector is burdened with an ailing infrastructure, high energy costs, low cotton production, blocked tax refunds, artificial foreign exchange rate and poor quality human capital; making us regionally uncompetitive. As a result, our textile exports are hampered and Pakistan is losing its export share in the global market.
We will make energy costs regionally competitive for the textile sector.
We will ensure release of blocked tax refunds and subsequent refund orders issued will take form of “Negotiable Instruments”.
We will lobby for the GSP+ status of Pakistan; specifically in EU through foreign missions with support of trade regulatory authorities.
We will increase our cotton production through better inputs and research, while ensuring right prices are offered to farmers.
We will establish internationally accredited labs for product testing and improve product quality.
We will champion local textile machinery manufacturing and incentivise plant upgradation.
We will strengthen the allied industries to ensure that required inputs are manufactured in Pakistan to the extent economically viable.