Donor agencies have been clamouring for reforms in Pakistan’s unfair, inequitable and anomalous tax structure but to date to no avail. Ideally, the onus of tax revenue must shift away from reliance on indirect taxes (whose incidence on the poor is greater than on the rich which at present account for nearly 80 to 85 percent of all tax collections) to direct taxes (based on the ability to pay principle).

The country’s 78-year history shows no lesson has been learned reflected by an economy that not only requires a periodic steroid injection administered under an increasingly rigid International Monetary Fund (IMF) programme (Pakistan is currently on its 24th IMF programme) but post-2019 there is an escalating reliance on rollovers from friendly countries as a condition for Fund programme approval/staff level agreement.

Today rollovers as per the Governor State Bank of Pakistan amount to 16 billion dollars with 12 billion dollars already secured for another year and the remaining 4 billion dollars expected to be secured for another year as and when they mature. The expected reserves as per the Governor: 14 billion dollars by 30 June this year, or 2 billion dollars less than the rollovers.

The outcome of this long-term prevailing flawed tax policy has been devastating and, disturbingly, has been the outcome of administration after administration, including the incumbent, successfully convincing donors to agree to unrealistic total collections while pledging structural reforms later in the programme, with donors’ agreement perceived as a major design flaw.

In the current year the envisaged rise in tax collections was 40 percent while actual increase for the first ten months has been around 26 percent with a shortfall of 833 billion rupees. Next fiscal year in the first staff review documents, the Fund has projected total tax........

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