Tax collection in Pakistan remains below its potential, yet growth in tax revenues over the past decade has been notable. In the fiscal year 2013-14, total tax revenues stood at Rs2.56 trillion. By FY24, this figure had risen to Rs10.09tr, according to the Ministry of Finance. This increase represents a compound annual growth rate of 14.68 per cent.

However, this impressive growth has come at a cost to citizens. Nearly every good and service used by Pakistan’s 242 million people is now taxed — from fresh milk and bread to petrol, mobile phone usage, and dining at restaurants.

Over the past decade, the focus has remained disproportionately on indirect taxes rather than direct taxes, disproportionately burdening the poor and unemployed. Despite this, successive governments have failed to meet their total expenditure through tax revenues. Only a fraction of total revenue has come from non-tax sources, such as profits earned by the State Bank of Pakistan (SBP), forcing the government to rely heavily on domestic debt.

The lack of innovative revenue-generating strategies and the failure to create a conducive economic environment has made it difficult for governments to secure sufficient non-bank borrowings. As a result, each administration has continued excessive borrowing from banks, crowding out the private sector from access to credit.

Without genuine fiscal discipline, the country........

© Dawn Business