Page 11 - CMA Journal (May-June 2025)

Exclusive Interview

ICMA: How can political consensus be built around
economic reforms that directly affect business viability?
I don't think the FBR collection
Miftah Ismail: I think Pakistan really has no political
target of 14.13 trillion is consensus, even on basic things like elections — who is
elected and who is not. So, to build a consensus around
achievable at all. I think they economic reforms, I think, is next to impossible. There is
will probably fall short by 1,000 no proper politics in Pakistan to speak of. Your largest
opposition party, PTI, is under a lot of duress, and the
billion rupees — that is to say, government parties really don’t do politics either. I think
their politics are also dead. So first, I think we need to
1 trillion rupees revive politics in Pakistan, and only then can we have a
consensus around economic issues.
ICMA: Pakistan’s business environment is often viewed
ICMA: The Budget 2025-26 offers limited relief to the as uncertain and unstable. What do you see as the
salaried class, while largely overlooking untaxed and biggest barriers to long-term business sustainability?
undertaxed sectors. Do you think this imbalance
undermines fairness and tax equity? Miftah Ismail: The biggest barriers to long-term
business sustainability in Pakistan have to do with the
Miftah Ismail: Pakistan really has to work on fairness and
kind of policies we pursue. This means that we keep the
equity in taxation. Pakistan has neither vertical equity dollar at a certain nominal target for some years, and
nor horizontal equity. When it comes to horizontal then, all of a sudden, it depreciates by 50% or more. Then
equity, people with equal incomes don't pay equal tax
we go running to the IMF, restart the whole cycle — keep
here. And we certainly lack vertical equity in terms of
the dollar-to-rupee at a nominal parity — and again the
richer people paying a higher proportion of their
rupee crashes, and we have to run to the IMF and repeat
income. In Pakistan, on the contrary, richer people pay a the process.
lower proportion of their income in taxes than poorer
people, who not only pay income tax on their earnings Then, of course, there are the very high budget deficits
but also pay sales tax on everything they buy. that we have. And the third thing, of course, is the
dysfunctionality of our government — it is not able to
And then, of course, salaried people with a salary of
deliver anything to the people, to businesses, or to
50,000 rupees start paying tax, whereas you can have
1,000 acres of agricultural land and pay no income tax. Or common citizens. All of these factors become barriers to
you can have large properties in urban areas and pay long-term business sustainability.
little to no tax. So, we need to have both horizontal ICMA: How critical is macroeconomic stability – such
equity and vertical equity. as inflation, interest rates, and exchange rates – for
ICMA: Do you believe the proposed FBR revenue sustaining businesses, and what should policymakers
collection target of Rs. 14.13 trillion is achievable, or do to ensure it?
does it risk overburdening the economy?
Miftah Ismail: Macroeconomic stability, of course, is the
Miftah Ismail: I don't think the FBR collection target of key to getting your economy going in the short and
14.13 trillion is achievable at all. I think they will probably medium term, and to achieving growth in the short and
fall short by 1,000 billion rupees — that is to say, 1 trillion medium term.
rupees. They are talking about improving enforcement
and getting more money out of this. That remains to be
seen. I think even their projection for economic growth is
too optimistic. So, I don't think they will come close to I would actually try to redo
14.13 trillion.
the NFC Award and keep
ICMA: How do you assess the overall impact of this
Budget 2025-26 on business confidence and private 80% of the new money coming
sector investment?
into the federal government
Miftah Ismail: I think business confidence and private
sector investment was already very low in Pakistan, and for reducing the federal
this budget absolutely does not improve the situation. If
anything, it makes it worse. I think a lot of private sector budget deficit
people were looking for some relief in this budget, and
that has not come about.
ICMA’s Chartered Management Accountant, May-June 2025 9