Editorial
The IMF’s decision to lower Pakistan’s tax collection target from Rs 12.97 trillion to Rs 12.35 trillion underscores more than just economic slowdown—it exposes the chronic dysfunction at the heart of the country’s taxation system. This isn’t a concession out of sympathy, but a damning acknowledgment of the Federal Board of Revenue’s (FBR) failure to reform, innovate, or expand the tax base beyond a narrow, overburdened segment.
Despite imposing Rs 1.3 trillion in new taxes for FY 2025, the FBR faces a shortfall of Rs 714 billion in just nine months, revealing its overreliance on the salaried class—those who cannot evade tax due to source-based deductions. These individuals contributed nearly 10% of income tax collected, up from 7.5% last year, while traders, real estate moguls, and agricultural elites largely remain outside the tax net, protected by political patronage and institutional cowardice.
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The imbalance is staggering: Rs 10 in tax from salaried workers for every 60 paisas from traders. The government’s withholding tax on traders generated Rs 13.3 billion—but much of that cost was passed on to consumers, defeating the purpose of equitable taxation.
What’s worse, discretionary abuse by tax officials, selective enforcement, and the lack of legal reforms perpetuate a system where evasion is rewarded and compliance is punished. Parliament continues to avoid critical reforms like agricultural taxation and asset registries, preferring political convenience over fiscal responsibility.
The IMF may have accepted a lower target, but donor patience is wearing thin. Without structural reform, continued support is at risk. If Pakistan wants economic stability, it must end the exploitation of its compliant taxpayers and finally build a just, broad-based, and enforceable tax system that doesn’t punish honesty but upholds equity.
