IN the grand framework of society, the principles of justice and equity are meant to guide the distribution of wealth and opportunity. In Pakistan, these ideals remain elusive despite its abundant natural resources and a workforce brimming with potential. The country finds itself trapped in a cycle of inequality, where challenges in governance and management continue to sustain an imbalanced status quo. The elite, privileged by their wealth and influence, continue to flourish, while the common people, especially the salaried middle class, are burdened with a disproportionate share of taxes, often in indirect and regressive forms. Meanwhile, tax evaders slip through the cracks, untouched by the very system that demands so much from the rest. The widening gap between the rich and the poor reflects not just a moral shortcoming, but a pressing call for reform, an essential overhaul of the tax system to ensure that fairness, not privilege, shapes the country’s economic reality.
Neighbouring countries like India, Bangladesh and Sri Lanka have made significant progress in reforming their tax systems and addressing economic inequality. India’s Goods and Services Tax (GST) was introduced to consolidate multiple indirect taxes, simplify the tax structure and enhance transparency, reducing tax evasion and ensuring fair distribution of taxation burdens. India’s progressive income tax system requires wealthier individuals and corporations to pay a higher share of their income, with multiple tax brackets. Digital tax compliance and the formalization of the informal economy have expanded the tax base, resulting in efficient tax collection. Programs like the faceless assessment system aim to limit corruption and ensure fair tax compliance, enhancing revenue generation and building a more equitable and sustainable economy. Bangladesh has expanded its tax net, reducing reliance on foreign aid and loans and Sri Lanka has implemented fiscal reforms to make its tax system more inclusive.
Pakistan needs comprehensive tax reform with a wealth tax targeting the elite class that hold vast assets but contribute little to taxes. By imposing a wealth tax on individuals with assets exceeding Rs. 50 million and progressively increasing the rate for those with even greater wealth, Pakistan could ensure that the rich are contributing a fair share. Similarly, large houses and agricultural land beyond a certain size should also be taxed, ensuring that those who have the most to give are not exempt from their societal obligations. This would not only help bridge the inequality gap but would also generate sizeable revenue to fund critical public services and infrastructure projects. Elite clubs and luxury goods, often associated with the wealthiest segments of society, could also be targeted for taxation. High-end clubs, with memberships numbering in the thousands, could be taxed heavily, with substantial annual super taxes levied on each member. Luxury goods such as expensive cars, yachts and real estate transactions should be taxed at higher rates, ensuring that the elite contribute more to the national economy. Such measures would send a clear message that the affluent must play a more active role in supporting national development.
Another area ripe for reform is education, where the elite have long enjoyed tax breaks while sending their children to private institutions that charge exorbitant fee. Imposing a tax on the fee paid to elite schools and universities would generate considerable revenue, which could be redirected to strengthen the public education system. This would help improve access to quality education for the broader population, breaking the cycle of poverty that keeps many in the lower economic strata. The agricultural sector, which accounts for a significant portion of Pakistan’s economy, is another area where tax reforms are desperately needed.
Large-scale agricultural operations, especially in crops like processed tobacco leaves, sugarcane and cotton, often evade taxes due to the informal nature of the sector. By imposing a small tax on the supply of cash crops to mills, the government could begin to capture revenue from a previously untapped source while also addressing the issue of tax evasion in agriculture. Charitable foundations and trusts that enjoy tax exemptions must also be brought under scrutiny. Many of these organizations, while presenting themselves as charitable, often benefit the elite and allow them to evade taxes. By removing tax exemptions for such organizations and ensuring that they are held accountable for their financial activities, the government can close yet another major loophole in the system.
Equally important is the need to reassess the defence budget. A modest reduction in non-combat defence spending, with funds reallocated to critical social sectors like healthcare, education and infrastructure, would not only improve the welfare of people but also contribute to long-term economic growth. Another critical measure is to cut subsidies that disproportionately benefit the elite. The government currently spends billions on subsidies that primarily serve the wealthy, while the poor continue to struggle. These subsidies should be redirected to poverty alleviation programs, ensuring that resources are directed where they are needed most. Improving trade relations with neighbouring countries, especially India, could help open new markets for Pakistani goods and services, boosting employment and economic growth. The development of the tourism sector, with the introduction of visa-on-arrival services could magnify the economy by attracting foreign currency and promoting local businesses.
By addressing tax inequities, removing loopholes and promoting responsible governance, Pakistan has the potential to build a future grounded in justice and prosperity. The political will and a sincere commitment to social responsibility are essential to turning these aspirations into reality, allowing the country to break free from its cycle of economic inequality and create an inclusive society where everyone has the opportunity to flourish, paving the way for true economic justice and fairness for all.
—The writer is PhD in Political Science and visiting faculty member at QAU Islamabad.
(zafarkhansafdar@yahoo.com)
