ISLAMABAD: Businesses and salaried individuals in Pakistan’s formal economy are facing growing financial pressure amid a rising tax burden, higher operational costs, and continued delays in tax refunds.
Stakeholders say the adjustment burden under ongoing economic reforms is falling largely on the documented sector.
Compliance Comes at a Cost for Businesses
Formal sector businesses say they require policy stability rather than exemptions. However, they cite rising taxes, input costs, and delayed refunds as key challenges affecting liquidity and operations.
They argue that refund delays effectively lock up working capital, forcing compliant businesses to finance government obligations while meeting their own expenses.
Salaried Class and Formal Sector Carry Major Tax Share
Analysts note that salaried individuals and formal businesses contribute a large share of tax revenue due to their visibility in the system, while significant portions of the informal economy remain outside the tax net.
They say this reflects structural enforcement gaps rather than lack of compliance by documented taxpayers.
High Energy Costs Affect Competitiveness
Rising electricity and fuel prices are also cited as major constraints on industrial productivity and export competitiveness. Businesses say energy inefficiencies are increasing overall costs for productive sectors.
Delayed Refunds Tighten Liquidity
Business representatives say delayed tax refunds reduce available working capital, as pending amounts cannot be used for salaries, supplier payments, or operational needs.
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Call for Broader Tax Base
Stakeholders emphasize the need to expand the tax net and improve enforcement in under-documented sectors to create a more balanced taxation system.
Focus on Growth and Stability
Analysts say fiscal policy should not only aim at revenue targets but also support investment, employment, and long-term economic growth.
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