57.5% tax share, education, population ministries up for NFC review: FinMin | The Express Tribune

ISLAMABAD:

Finance Minister Muhammad Aurangzeb said on Monday that the government would only discuss proposals of ending a minimum constitutionally guaranteed 57.5% provincial share in taxes and taking back education and population welfare ministries in the federal fold in the upcoming National Finance Commission meeting.

Aurangzeb comments came hours after the Pakistan Peoples Party Chairman Bilawal Bhutto lifted the curtain on the 27th constitutional amendment.

“This discussion belongs to NFC where it will take place”, said Aurangzeb while denying commenting on the government’s proposals to reverse decentralization of education and population welfare subjects and end the constitutionally minimum guaranteed 57.5% shares of the provinces in the federal divisible pool.

The finance minister was addressing a press conference to brief about the structural reforms, which the government claimed were undertaken over the past one year. He was accompanied by federal ministers for power, information technology, advisor to PM on privatisation, secretary finance and chairman of the Federal Board of Revenue.

However, the Minister of State for Finance Bilal Kayani and the Federal Minister for Petroleum were conspicuously absent from the briefing despite both being present in Islamabad. Bilal Kayani is leading the Prime Minister’s cashless economy initiative.

Bilawal Bhutto tweeted about the eight points that Prime Minister Shehbaz Sharif discussed with the PPP leadership as part of the proposals of the 27th constitutional amendment.

The federal government since has long been saying that the decision to increase provincial shares in revenues to 57.5% tilted the fiscal balance in favour of the federating units 15 years ago, which sowed the seeds of perpetual federal fiscal deficit.

The Minister of State for Law, Barrister Aqeel Malik, while speaking to a private news channel, said that the National Finance Commission required political consensus, “which we are developing with our allies”.

Aqeel Malik added that the proposed amendment also included a provision about the return of the subjects of education and population planning to the federation

The education and population planning ministries had been devolved to the provinces 15 years ago under the 18th constitutional amendment.

Investors’ Confidence issue

While responding to question about the foreign companies leaving Pakistan, the finance minister attributed the existing of the multinational companies with change in their global business strategies. But Aurangzeb added that the international and local investors were also taking interest in business ventures in Pakistan.

To a question about the local investors’ complaints to Prime Minister about alarmingly tough economic conditions, Muhammad Ali said that it takes time to build investors’ confidence and change their perception. The government was trying to address the concerns of the business community, said Muhammad Ali.

Last week, Prime Minister established eight working groups to address the business community’s concerns, who claimed that the exports were about to completely collapse. Shehbaz Sharif has assigned the task of completing the working groups’ exercise by mid of this month to minister of state for finance, Bilal Kayani. The government will then take up these recommendations with the IMF.

“We want to move forward in consultations” with the business community, said the finance minister while commenting on the development.

Low Integrity Officers sidelined

Chairman FBR Rashid Langrial said that he had sidelined low integrity officers of FBR being categorized ass C, D and E, from key positions and appointed good reputation officers having A and B categories. The chairman was referring to PM’s intelligence agencies’ input-based categorization of FBR officers.

Langrial said that in July 2023, 74% key positions of FBR had been occupied by low Inland Revenue Officers of C, D and E categories, a ratio which is now reduced to just 11%. He further said that in July 2023, 89% customs key positions had been occupied by low category officers, which is now reduced to just 6%.

While commenting on overall situation, the chairman FBR said that Pakistan’s tax-to-GDP ratio was targeted to grow to 18% by 2028. “Of this 18% tax-to-GDP ratio, 15% would be made up by FBR and 3% from provinces,” said Langrial. “There is a lot of soul searching, which has to take place on the provincial level,” he added.

The FBR chief said that the number of individual tax filers increased by 18% this year compared to last year, an increase from 4.9 million to 5.8 million. “This is a significant increase,” he said.

Langrial said that despite a tax shortfall of nearly 275 billion in July-October 2025-26, the government does not intend to impose contingency measures. The FBR provisionally collected Rs3.834 trillion as against the assigned target of Rs4.109 trillion.

Langrial, citing data, said that the income tax gap of top 1% income earners is Rs1.2 trillion, while the total income tax gap stands at Rs1.7 trillion.

He said that in the last fiscal year the tax-to- GDP ratio increased over the last year by 1.5% but admitted that more than half of it was because of additional tax measures.

Pension reforms

Finance Secretary Imdad Ullah Bosal said that the direct contributary pension for the civilian employees has been implemented since last year. He added that the government was in discussions with the armed forces for implementing the contributory pension, although the cabinet had approved July 2025 deadline.

The Finance Secretary revealed that “there is going to be some adjustments in implementation of contributory pension scheme for armed forces”.

During the press briefing, Federal Minister for IT & Telecom Shaza Fatima Khawaja said the country was moving towards a cashless economy.

Finance Minister Muhammad Aurangzeb on Monday said that Pakistan’s economic direction had been set right through a series of structural reforms, which were now being operationalised to ensure sustainable and inclusive growth.

“I believe there is a broad consensus that we have made significant inroads and achieved considerable progress in terms of macroeconomic stability,” he said while addressing a joint news conference on economic reforms.

Aurangzeb said the government had achieved macroeconomic stability, as evidenced by external validation: three leading international rating agencies upgraded Pakistan after a gap of three years. “These agencies are now aligned not only on where we stand but also on our positive outlook,” he added.

Highlighting the next phase of economic management, the finance minister said Pakistan must now focus on avoiding historical boom-and-bust cycles and move toward sustained and inclusive growth.

Privatisation

On the privatisation of Pakistan International Airlines (PIA), Ali said that the government failed in its initial attempt to sell the national carrier, which occurs in these complex transactions.

“Currently, we have changed the transaction structure and remain actively engaged with investors. At this time, our buyers, including Pakistan’s top groups, are conducting due diligence,” he said.

The PIA privatisation is in its final stages, with the bidding process expected to be completed by the end of 2025, he said. “We want to see a turnaround of PIA,” he said.