The announcement by Pakistan’s Finance Minister, Mohammad Aurangzeb, to abolish the “non-filer” category represents a pivotal moment in Pakistan’s tax policy, ostensibly aimed at improving the country’s economic health and aligning with International Monetary Fund (IMF) directives. By barring non-filers from property and vehicle purchases, the government signals its commitment to formalizing the tax base. However, while these measures may look promising in theory, they reveal an underlying disconnect between policy intent and ground realities faced by the average Pakistani citizen. Aurangzeb’s ambitious goal of raising the tax-to-GDP ratio from 9% to 13% reflects Pakistan’s longstanding struggle with a narrow tax base. For years, Pakistan’s economy has relied disproportionately on indirect taxes, often leading to a scenario where those least equipped to bear the burden carry the bulk of it.
As it stands, inflation may have eased on paper, but for millions of Pakistanis, daily essentials like food, fuel, and utilities remain unaffordable. Despite these economic constraints, many in the working and middle classes are effectively deemed “defaulters” for not being part of the formal tax net, even though they contribute through indirect taxes. This label not only stigmatizes them but also paves the way for policies that unfairly penalize an already stretched populace. The exclusion of non-filers from essential purchases, such as property and vehicles, is an aggressive tactic that risks alienating ordinary citizens, who often operate outside the tax net due to the informal nature of their earnings, rather than deliberate tax evasion. This measure, therefore, could inadvertently deepen socio-economic divides, impacting those who are already bearing a considerable tax burden in the form of indirect levies.
In many cases, the average citizen lacks access to the means or the infrastructure to formally file taxes, a situation that often characterizes developing economies where informal employment predominates. For instance, small-scale entrepreneurs, daily wage workers, and freelance earners, who might not have the same channels to register as tax filers, could be further marginalized under this policy. A fairer approach to expanding Pakistan’s tax base would involve more equitable measures, specifically targeting those in affluent brackets who often evade taxation despite holding substantial assets. Wealthy individuals and corporations in sectors such as real estate, banking, and high-net-worth industries frequently exploit legal loopholes, resulting in grossly underreported asset values and capital flight. A strengthened focus on progressive taxation, with property, capital gains, and inheritance taxes that reflect the true value of holdings, could raise revenue in a way that promotes social equity.
Implementing a transparent tax policy that prioritizes the wealthy as primary contributors would align with the IMF’s requirements while lifting some of the weight off lower and middle-income households, fostering a sense of shared responsibility. The Finance Minister’s determination to stabilize Pakistan’s economy, while admirable, risks missing the mark without a comprehensive approach that recognizes the need for social equity. True economic progress hinges not only on meeting IMF benchmarks but on forging a sustainable path that brings the affluent into the tax net without pushing the working class into further hardship. Policymakers must also consider institutional reforms, ensuring that the Federal Board of Revenue (FBR) has the resources and autonomy necessary to enforce equitable tax collection effectively and transparently.
This approach would shift the narrative from punitive measures aimed at ordinary citizens toward a more just system that acknowledges the constraints faced by various economic segments. Long-term stability requires that Pakistan’s fiscal policies uphold social cohesion by ensuring that economic progress is shared. Without a fundamental reimagining of its tax framework, the government risks exacerbating economic divides, rendering even the best-intentioned reforms superficial at best and damaging at worst. In its pursuit of economic revival, Pakistan’s leadership should emphasize transparency, accountability, and shared responsibility, ensuring that the journey toward economic recovery is one that includes—not excludes—the average Pakistani.
