The Economic Policy & Business Development (EPBDT) a leading economic think tank on Monday unveiled sweeping structural reform proposals aimed at steering Pakistan out of its recurring boom-and-bust economic cycle, slashing the tax burden on businesses and salaried individuals, and shifting the economy toward export-led growth with a target of achieving up to 8.5 percent GDP growth by FY31.
EPBDT launched Pakistan’s first-ever “Shadow Policy Documents”, including an alternative tax reform framework, shadow federal budget, shadow economic survey, and a five-year development plan, presenting what it described as a citizen and business-focused alternative to the government’s current economic policies.
The documents were formally launched by EPBDT Chairman Dr Gohar Ejaz, who said Pakistan needed “structural, homegrown reforms” to break free from perpetual dependence on IMF programmes and place the economy on a sustainable growth trajectory.
Dr Ejaz was flanked by EPBDT Patron-in-Chief Bashir Jan Muhammad, EPBDT Chief Executive Officer Ahmad Nawaz Sukhera, and Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Patron-in-Chief SM Tanveer during the launch ceremony.
According to the think tank, Pakistan’s tax structure had become “distorted, imbalanced, regressive and extractive”, generating revenue at the cost of documented sectors, productive businesses, and economic growth.
In its proposed “Tax Policy & Administration Reforms”, EPBDT called for reducing the corporate tax rate from 29 percent to 25 percent, withdrawing super tax for all sectors except banking, and eliminating withholding tax on inter-corporate dividends in a bid to enhance private sector competitiveness and reduce the cost of doing business.
The think tank also proposed substantial relief for salaried and non-salaried taxpayers. It recommended reducing the income tax rate for the salaried class from 35 percent to 20 percent, while lowering the rate for non-salaried individuals from 45 percent to 25 percent. It further proposed increasing the exemption threshold to Rs800,000 and allowing standard deductions, estimating a cumulative tax relief of approximately Rs390 billion for salaried taxpayers.
As part of broader tax reforms, EPBDT proposed reducing withholding tax categories from 52 to 32 and gradually lowering the general sales tax (GST) rate from 18 percent to 15 percent over a three-year period. The think tank also recommended abolishing the “non-filer” category and introducing joint tax filing for families while expanding the tax base by bringing retailers, vendors, and merchants into the formal net.
For the real estate sector, the proposals included reducing Sections 236C and 236K transaction taxes to a flat 0.5 percent each from existing rates of up to 5.5 percent, alongside complete abolition of Section 7E dealing with deemed income tax on immovable property.
The think tank also stressed immediate and time-bound tax refunds, automation and simplification of tax collection systems, and rationalisation of agriculture income tax by shifting from corporate-style taxation to land-based treatment. It further proposed that Workers Welfare Fund (WWF), Workers Profit Participation Fund (WPPF), EOBI, and social security mechanisms should be managed independently by the private sector.
Highlighting the growing burden of tax litigation, EPBDT stated that nearly Rs5.7 trillion remained stuck in courts and proposed time-bound judicial decisions along with removal of the mandatory 30 percent pre-deposit requirement for High Court tax appeals. The think tank also called for strengthening alternative dispute resolution mechanisms for faster settlement of tax disputes.
The reform package further proposed amendments to anti-avoidance provisions and Section 111(4) of the Income Tax Ordinance to incentivise inward remittances and investment by overseas Pakistanis. It also recommended restoring incentives for 100 percent equity-based industrial investment under Section 65 of the Income Tax Ordinance.
According to EPBDT estimates, the proposed reforms, supported by improved compliance, digitisation, e-invoicing, POS integration, and the addition of up to 2.5 million new taxpayers, could increase tax revenues from Rs14.5 trillion in FY27 to between Rs20.5 trillion and Rs24 trillion by FY29.
The think tank also recommended restructuring the Federal Board of Revenue (FBR) by appointing a qualified chairman on a fixed three-year tenure and creating separate Inland Revenue and Customs boards with majority private sector representation.
Under its “Shadow Economic Survey”, EPBDT projected Pakistan’s GDP growth rising from 4.2 percent in FY26 to 8.5 percent by FY31 under full implementation of reforms, compared with a baseline trajectory of 3.7 percent to seven percent. It estimated the economy could expand by an additional $236 billion during the period, with nominal GDP reaching $688 billion by FY31 from the current $452 billion.
Sectoral growth targets proposed by the think tank included agriculture growth rising from 3.6 percent to 6.8 percent, industrial growth from 4.3 percent to nine percent, and services sector growth from 4.8 percent to 9.6 percent by FY31.
EPBDT projected goods exports increasing to $78 billion and workers’ remittances climbing to $60 billion by FY31, while the trade balance for goods and services could narrow to zero under the reform framework.
The think tank also forecast headline inflation declining from around seven percent in FY26 to five percent by FY31, while the State Bank of Pakistan’s policy rate could ease from 11.5 percent to seven percent over the same period.
The shadow economic survey identified seven priority sectors capable of generating cumulative GDP gains of up to $236 billion through structural reforms, including housing and construction, digital economy, manufacturing, export-led growth, workers’ remittances, private sector credit expansion, and cost of doing business reforms.
In its proposed “Shadow Federal Budget 2026-27”, EPBDT called for aggressive expenditure rationalisation through downsizing the government, privatisation of state-owned enterprises, pension reforms, rightsizing of ministries, rationalisation of the Public Sector Development Programme (PSDP), and elimination of subsidies and tax exemptions.
The think tank proposed total revenues of Rs19.6 trillion for FY27, including FBR tax revenues of Rs14.5 trillion and non-tax revenues of Rs5.1 trillion, while recommending total federal expenditure be reduced to Rs14.9 trillion.
EPBDT projected the federal fiscal deficit declining to Rs3.6 trillion, or 2.6 percent of GDP, in FY27 compared with Rs7.1 trillion, or 6.2 percent of GDP, in FY25. It further estimated cumulative savings of Rs4.6 trillion over three years through implementation of its reform proposals.
Under its five-year development framework, the think tank proposed rationalisation of 91 PSDP projects, estimating savings of nearly Rs1.5 trillion, while over Rs5 trillion in additional savings could be generated through rightsizing ministries, divisions, and autonomous bodies.
The think tank projected creation of nearly 20 million additional jobs by FY31, led by agriculture, housing and construction, services, and textile sectors. It identified housing and construction as a key engine of domestic growth capable of generating four million jobs and contributing $25 billion to GDP by FY31.
EPBDT also emphasised export-led growth through trade diplomacy, zero tariffs on raw materials, export incentives, renegotiation of trade agreements, and support for exporters through duty drawbacks and research and development incentives. It projected combined exports of goods and services crossing the $100 billion mark by FY31.
Concluding the presentation, the think tank maintained that Pakistan could only achieve sustainable and inclusive economic growth by empowering the private sector, encouraging industrial investment, and implementing broad-based structural reforms to permanently end reliance on repeated IMF programmes.
