The introduction of a new bill in the National Assembly, aiming to amend existing tax laws, reflects yet another attempt to address Pakistan’s persistent fiscal challenges. At its core, the proposed legislation seeks to tighten the noose around tax evaders — classified as “ineligible” persons — by imposing spending restrictions on high-value assets. While the initiative introduces new categories like “eligible” and “ineligible” taxpayers to distinguish between compliant and non-compliant citizens, it is far from the transformational overhaul that Pakistan’s ailing tax system desperately needs.
Under the bill, “eligible” persons, defined as active taxpayers, and their immediate non-filer family members, are exempt from punitive spending restrictions. However, the controversial category of non-filers remains untouched. This contradiction undermines repeated promises by financial authorities to abolish the classification. The retention of the 10th Schedule, which enforces higher tax rates for non-filers, is understandable in terms of revenue collection — generating approximately $700 billion annually for the Federal Board of Revenue (FBR) — but it highlights the system’s reliance on patchwork solutions rather than holistic reform.
The bill’s measures include granting the FBR the authority to freeze bank accounts, confiscate properties of non-registered sales taxpayers, and share confidential data with banks and private auditors. Furthermore, it limits cash withdrawals and investments in stocks by “ineligible” individuals, while offering a limited amnesty for undeclared assets linked to remittances and inheritance. These steps, however, are unlikely to produce the significant revenue uplift required to meet the IMF-mandated tax-to-GDP ratio of 13% over the next three years.
The real issues lie deeper. Pakistan’s tax system remains plagued by inefficiencies, corruption, and systemic distortions. Powerful lobbies continue to enjoy massive tax exemptions, while honest taxpayers face harassment and inequitable withholding taxes. These structural flaws incentivize non-compliance and discourage voluntary participation in the tax net. By failing to address these core problems, the proposed legislation risks being another “quick fix” rather than a meaningful solution.
Alarmingly, the legislation also shifts the responsibility of verifying taxpayers’ credentials to businesses and other government agencies. This abdication of responsibility raises concerns about the FBR’s capacity to effectively implement the new measures. Instead of addressing its own inefficiencies and lack of accountability, the FBR appears more focused on wielding greater powers, which could lead to further mistrust between taxpayers and the authorities.
To achieve sustainable improvements in tax revenues and compliance, Pakistan requires a comprehensive overhaul of its taxation system. Structural changes, such as curbing corruption within the FBR, simplifying tax procedures, eliminating unjust exemptions, and ensuring fairness in tax collection, are indispensable. Relying on short-term gimmicks and coercive measures will not yield the desired outcomes.
The proposed bill, while a step toward tightening enforcement, fails to inspire confidence that it will address the root causes of Pakistan’s dismal tax performance. Without genuine reform, the country’s tax regime will remain a system that prioritizes survival over sustainability, perpetuating a cycle of inefficiency and inequity.
