Islamabad: Pakistan’s exports will remain constrained unless the country’s large informal sector is integrated into the formal economy, Federal Minister for Commerce Jam Kamal Khan stated, emphasizing that formalization would enhance export growth, increase tax revenues, and improve the overall quality of manufacturing.

According to Press Information Department, Mr. Khan expressed these views during a meeting with Mohammad Haris Agar, Director of Agar International (Pvt) Limited, where they discussed the challenges in Pakistan’s taxation system, trade structure, and economic documentation. Despite Pakistan’s large economic base, revenue generation—estimated around Rs15 trillion—remains limited due to a narrow tax net and weak enforcement. Large segments of the economy, including agriculture, retail, and small businesses, operate outside the formal system, placing an excessive burden on compliant and registered sectors.

The Minister highlighted that the current imbalance discourages growth, as documented businesses bear higher tax and compliance costs. He noted that incentives and reforms are necessary to encourage voluntary compliance for a transition toward a documented economy. Disparities in the taxation structure between commercial importers and industrial sectors were discussed, with existing reliance on upfront taxation and limited traceability mechanisms creating inefficiencies.

Mr. Haris Agar pointed out that while policies exist to differentiate between sectors, implementation gaps persist, with commercial activity often dominating over industrial value addition. Both parties agreed that a shift toward goods-based taxation, improved documentation, and supply chain traceability is essential. The Minister reiterated the importance of bringing SMEs and informal businesses into the formal economy through facilitation, incentives, and gradual reforms for sustainable growth.

He concluded that a more inclusive and transparent economic framework would broaden the tax base and strengthen Pakistan’s export competitiveness and industrial development in the long term.