PM Shehbaz hints cutting direct taxes in next budget to help businesses

ISLAMABAD: Prime Minister Shehbaz Sharif on Wednesday stressed the need to reduce direct taxes in the upcoming federal budget. He said that long-term economic growth cannot be achieved by putting more tax burden on people and businesses.

“How long can we keep stretching this?” the prime minister said. “[…] Unless there is growth and unless production and exports increase, and unless you invest and attract foreign direct investment, how much more tax can you continue to impose?”

He was speaking at the opening session of the Pakistan Governance Forum 2026 in Islamabad.

PM Shehbaz said the government plans to cut direct taxes in the next budget to support the business community and give confidence to investors. He said investors should feel secure that their money will not be reduced because of heavy taxation.

He also spoke about expanding the tax net and said the country’s tax-to-GDP ratio has reached 10.5% due to different measures. He highlighted the importance of increasing production, exports, investment, and foreign direct investment (FDI). He also mentioned the need to reduce indirect taxes in the next fiscal budget.

The prime minister said it was unfair that indirect taxes collected from consumers were not being deposited with the government. He stressed that all stakeholders must work together to solve economic challenges.

He said that in June 2023, Pakistan was close to default, but with teamwork from federal and provincial governments and the military leadership, the economy was stabilised within two years. Inflation, which was around 35%, has now come down to below 7%, and the policy rate has been reduced to 10.5%.

He added that some economic reforms were home-grown and not linked to the IMF. He said these reforms were necessary to avoid economic ups and downs.

Talking about the power sector, he said electricity prices were reduced by Rs9 per unit, while solar investments were protected. He also said the country suffers from Rs200 billion in power theft and that a joint effort is needed to stop it.

The prime minister said Utility Stores were closed because they had become “a den of corruption and theft”. He also mentioned the closure of the Pakistan Works Department (PWD), saying it was affected by corruption and its closure saved billions of rupees.

Under the PM’s Ramazan Package, Rs38 billion is being distributed to deserving people through digital wallets in a transparent way.

The event was attended by chief ministers, ministers, diplomats, investors, businessmen, and other officials.

In his closing remarks, the prime minister said: “Though the journey can be a long, arduous and thorny one, but we have accepted the challenge. Pakistan will carve its due place soon.”

He added that it is not the government’s job to run businesses, but to support and facilitate the private sector, exporters, and investors. The government, he said, is offering different incentives to encourage growth and productivity.