Pakistan collects taxes only to pay interest on loans: FBR chairman

KARACHI: Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial has said that Pakistan collects taxes throughout the year primarily to pay interest on loans.

Speaking at a ceremony organized by the Federation of Industry and Trade of Pakistan, Langrial emphasized that recent improvements in the country’s economic indicators came after two to three years of extremely challenging conditions. He credited the business community’s cooperation for these positive changes.

He noted that as inflation has declined, the policy rate has also started to decrease.

“Ideally, the difference between the inflation rate and the policy rate should not exceed 3-4 per cent. According to economists, interest rates may drop by another 2 per cent, which would further ease economic pressures,” he said.

The FBR chairman pointed out that the General Sales Tax (GST) rate, previously 16 per cent, has now increased to 18 per cent.

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He also praised the honesty of some taxpayers, including businessmen and industrialists, who pay their taxes diligently and ensure that they do not earn through illicit means.

He acknowledged that only a small number of officers in the FBR are actively working toward the country’s economic improvement.

Langrial expressed concern over Pakistan’s debt situation, stating that the revenue generated in 2008 remains stagnant. He lamented that the country spends an entire year’s tax revenue on debt repayments, with no clear solution in sight.

“We are collecting taxes throughout the year just to pay interest on loans,” he said, describing the situation as dire.

Langrial highlighted that 90 per cent of Pakistanis do not pay taxes. He pointed out that while there are 430 million homes in the country including 4 million of them having air conditioners, yet tax compliance remains low.

He argued that the current tax rate is unsustainable and must be reduced, including the corporate tax rate, which should not exceed 25 per cent.

He clarified that “this does not mean that the poor should be exempt from taxes entirely. Currently, only 5 per cent of the population pays taxes, a group he described as primarily capitalists.