Pakistan sets up tax policy office to improve revenue collection

Pakistan has established a separate Tax Policy Office within the Ministry of Finance, fulfilling another key condition set by the International Monetary Fund (IMF) to separate policymaking from revenue collection, according to official sources.

The move is part of a series of steps being taken by the government to increase tax collection. The South Asian country has one of the lowest tax-to-GDP ratios in the region, despite a population of more than 240 million, and has often failed to meet its tax collection targets.

Pakistan has lately introduced several reforms to ensure economic stability and to meet structural benchmarks under a $7 billion IMF program Islamabad secured last year. Earlier this month, the Fund approved the second tranche of the loan after appreciating the economic reforms being implemented by Islamabad.

For the current fiscal year, the IMF has set Pakistan a target of raising the tax-to-GDP ratio by 0.7 percentage points to 11%. An increase in tax collection requires extraordinary enforcement measures and significant efforts to broaden the tax base.

New office

Under the new arrangement, the Federal Board of Revenue (FBR) will now focus solely on tax collection, while the new Tax Policy Office will be responsible for drafting tax policies. This structural change aims to improve transparency and strengthen fiscal policymaking, sources said.

Dr. Najeeb Ahmed Memon, currently serving as Member, Inland Revenue Policy at the FBR, has been appointed head of the Tax Policy Office for a two-year term. The Ministry of Finance confirmed that all necessary staff appointments have been completed, making the office fully operational.

Work on tax policies for the upcoming fiscal year 2027 is expected to begin next week.

The Tax Policy Office will formulate policies on income tax, sales tax, and federal excise duties, while the FBR will continue to manage tax administration and revenue collection.

Among the new appointments, Naeem Hassan has been named Director of Business Taxation, Fida Muhammad as Director of International Taxation, Muneer Ahmed as Director of Direct and Indirect Taxation, and Ijaz Hussain as Director of Personal Taxation, according to ministry officials.

All directors have been appointed under a special professional pay scale. The office is expected to finalize its rules and regulations and commence full operations next week.

Finance Minister Muhammad Aurangzeb earlier reaffirmed that Pakistan's commitment to raising tax collection to 11% of GDP by the end of the fiscal year, despite the FBR missing its quarterly target by PKR 198 billion.

Speaking at the Atlantic Council during a recent visit to Washington, D.C., the finance minister outlined initiatives to bring the agriculture, retail, and real estate sectors into the tax net and to improve compliance through technology and AI-driven analytics.