FPCCI Releases Alternative Economic And Tax Reform Framework

The Federation of Pakistan Chambers of Commerce and Industry has unveiled four independent “shadow” policy studies presenting an alternative economic framework aimed at accelerating economic growth, expanding the tax base, and addressing Pakistan’s fiscal imbalances through structural reforms.

The studies were prepared by the Economic Policy and Business Development Think Tank and formally launched at the FPCCI headquarters.

The published documents include Tax Policy and Administration Reforms, Shadow Federal Budget 2026-27, Shadow Economic Survey of Pakistan 2026, and Shadow Five-Year Development Plan 2026-31.

According to FPCCI, the proposed framework is primarily based on private-sector-led economic expansion, fiscal consolidation, institutional reforms, and restructuring of public-sector financial management.

The Shadow Federal Budget 2026-27 proposed eliminating the fiscal deficit within three years through expenditure rationalisation, privatisation of state-owned enterprises, and reforms relating to pensions and subsidy structures.

The study projected total federal revenues of approximately ₨19.6 trillion and estimated a fiscal deficit equivalent to 2.6% of GDP for FY27.

It further recommended enhanced parliamentary oversight of the budgetary process and adoption of performance-based budgeting mechanisms.

The report highlighted that Pakistan’s public debt had increased significantly from nearly ₨19 trillion in FY16 to approximately ₨80 trillion by FY26, representing between 65% and 75% of GDP.

According to the study, domestic borrowing increased from ₨1.263 trillion in FY16 to ₨9.775 trillion in FY25, becoming a major contributor to federal expenditure obligations.

The proposed framework additionally emphasised strengthening debt management mechanisms and increasing non-debt financing through foreign direct investment and workers’ remittances.

The Tax Policy and Administration Reforms study analysed 21 economic sectors and identified extensive informality and under-taxation within the retail, services, and agricultural sectors, while also highlighting structural distortions in the real estate market.

The report stated that the existing taxation framework places disproportionate pressure on salaried individuals and corporate taxpayers, whereas various exemptions and concessions primarily benefit higher-income groups.

It also criticised the heavy dependence on withholding and presumptive taxation regimes, arguing that such mechanisms weaken transparency and discourage documentation of economic activity.

According to the study, the effective sales tax collection rate remains close to 12% despite the statutory rate of 18%, largely due to multiple tax slabs, exemptions, federal-provincial coordination issues, and delays in exporter refund processing.

FPCCI estimated that improved tax compliance and broadening of the tax base could increase Pakistan’s tax-to-GDP ratio by four to six percentage points over the medium term.

The Shadow Economic Survey projected that GDP growth could potentially rise to 8.5% by FY31 under a reform-oriented economic scenario.

The report identified manufacturing, exports, housing, digital economy expansion, and human capital development as key drivers of future economic growth.

It estimated that structural reforms could contribute approximately $236 billion to the national economy over five years through increased exports and remittance inflows.

Meanwhile, the Shadow Five-Year Development Plan projected the creation of nearly 20 million jobs by FY31.

The plan identified housing and construction, agriculture, and exports as priority sectors for economic expansion while also recommending rationalisation of public sector development expenditures and downsizing of government operations.

The framework further proposed export diversification strategies, trade facilitation initiatives, and investment incentives aimed at increasing Pakistan’s exports beyond $100 billion over the medium term.