Pakistan’s governments, both civil and military, have been criticized for imposing high and regressive taxes, leading to a heavy financial burden on citizens. The lack of welfare support exacerbates the situation, leaving economically vulnerable groups neglected, as highlighted in a piece from The Friday Times in Lahore.
The country’s fiscal challenges go beyond numbers, reflecting a broken social contract where citizens pay high taxes without adequate welfare benefits. This imbalance has not only failed to boost revenue effectively but has also damaged trust, discouraged investments, and weakened the formal economy, the article pointed out.
The root of Pakistan’s economic struggles is attributed to a costly and irrational business environment shaped by government policies. Operating a business in Pakistan is reportedly 34% more expensive compared to similar South Asian economies, according to a recent analysis by the Pakistan Business Forum cited in the article.
A concerning aspect raised in the article is the disproportionate tax burden on a small fraction of the population, while the informal economy remains largely untaxed. The tax system’s focus on increasing rates for the already taxed sectors instead of broadening the tax base has led to a high debt-to-tax ratio, surpassing 700%.
