Daily Times

Prime Minister Shehbaz Sharif’s recent statement about taking action against tax evaders is a step in the right direction. Tax evasion harms economic progress, burdens honest taxpayers and deprives the nation of crucial resources for development. However, capturing tax evaders, while important, addresses only part of the problem. The real challenge lies in expanding Pakistan’s narrow tax net, a critical task that successive governments have struggled to achieve.

The prime minister’s resolve to hold tax dodgers accountable must be accompanied by broader structural reforms to ensure that all segments of the economy contribute equitably to the national exchequer. Currently, Pakistan’s tax-to-GDP ratio remains among the lowest in the region, hovering around 9% to 11%. This is indicative of a system where the burden disproportionately falls on the salaried class and organized sectors, while large swathes of the economy-particularly agriculture, real estate, and wholesale trade-remain under-taxed or entirely outside the tax framework.

The Punjab government’s recent approval of the Agricultural Income Tax (Amendment) Bill 2024 is a welcome move. It is a commitment to addressing one of the most glaring inequities in Pakistan’s tax regime. However, such measures must be replicated across all provinces and enforced rigorously to generate meaningful revenue. Moreover, the real estate and wholesale sectors-both significant contributors to the informal economy-must also be brought under the tax umbrella.

Effective tax reform is not merely about imposing levies; it requires creating a culture of compliance and fairness. For this, the government must simplify tax filing processes, reduce bureaucratic hurdles, and ensure transparency in the utilization of tax revenues. Citizens are more likely to comply when they see tangible benefits from their contributions, such as improved infrastructure, healthcare, and education.

Additionally, leveraging technology can play a transformative role. Digitizing tax records, integrating databases, and using artificial intelligence to detect anomalies can enhance compliance and reduce corruption.

While the government’s efforts to stabilize inflation and boost foreign reserves are commendable, long-term economic sustainability hinges on broadening the tax base. Capturing tax evaders is a short-term fix; the true measure of success will be the inclusion of historically untaxed sectors and a significant increase in the tax-to-GDP ratio. *