By Sardar Khan Niazi

For decades, Pakistan’s tax system has been trapped in a narrow corridor, a small pool of formally registered taxpayers carrying a disproportionate burden while vast segments of the economy remain untouched. Each budget cycle, governments pledge to broaden the tax net, yet the structure remains fundamentally unchanged: low-income salaried individuals continue to be taxed at source, corporations face complex compliance requirements, and the informal economy flourishes on the margins with little pressure to declare income. The current fiscal moment, however, has made the need for expansion of the tax base more urgent than ever. With rising debt obligations, shrinking fiscal space, and dependency on external lenders, the state simply cannot afford to maintain a revenue model that excludes millions of potential contributors. However, broadening the tax net is a political, administrative, and structural project whose success depends on a clear shift in attitude and capacity. Pakistan’s tax system suffers from a deep credibility deficit. Citizens do not trust the money they pay is used equitably. This mistrust fuels a vicious cycle: low tax morale leads to low compliance, which leads to fiscal shortfalls, which then leads to higher indirect taxes that disproportionately hit the poor. Breaking this cycle requires far more than aggressive enforcement campaigns; it requires visible state performance. Investment in public services, transparent expenditure reporting, and demonstrable reductions in leakages would do more to encourage voluntary compliance than punitive notices ever will. Technology offers a path forward, but only if deployed intelligently. Integration of databases across NADRA, banks, real estate registries, utility providers, and provincial revenue authorities can help identify non-filers without harassment. Digital tax filing platforms need simplification so that small traders, freelancers, and gig workers can file returns without navigating jargon-filled forms or visiting tax offices. The objective should be to make compliance the easier path. Equally important is the political willingness to target entrenched elite exemptions. Agriculture, retail, wholesale trade, and real estate sectors that represent significant economic activity remain either lightly taxed or poorly documented. Any serious effort to widen the tax net must confront the influence of powerful groups. This is not merely a revenue issue but a question of fairness: why should the state demand more from those who already comply while allowing the wealthiest groups to operate outside the system? Yet, coercion alone will not work in an economy where much of the workforce operates informally out of necessity rather than evasion. Bringing these segments into the net requires a transition plan one that gradually formalizes businesses by offering incentives such as access to credit, simplified registration schemes, and reduced initial tax rates. Countries like Turkey and Indonesia expanded tax compliance by coupling enforcement with benefits, transforming taxpayers from reluctant participants into voluntary stakeholders. Local governments, too, must be part of this equation. Property taxes, business licenses, and municipal levies are important tools for widening the net, yet local bodies in Pakistan remain either dysfunctional or under-empowered. Strengthening local fiscal autonomy would not only diversify revenue channels but also improve service delivery at the grassroots level, thereby reinforcing the citizen–state relationship. Ultimately, the quest for a wider tax net is about redefining the social contract. A sustainable tax system cannot rest on extracting more from those already visible; it must bring into the fold those who have long existed outside formal structures. Achieving this requires a multi-pronged approach: administrative reform, political courage, technological modernization, and above all, a commitment to building public trust. Pakistan stands at a juncture where incremental reforms will no longer suffice. The tax base must expand not as a reaction to crisis, but as the foundation of a more equitable, stable, and sovereign economy.