Pakistan’s elites exploit state resources while the poor bear heavy taxes. Successive governments fail to curb tax evasion, exemptions, and corruption, worsening inequality and economic distress
By Dr. Ikramul Haq
Pakistan appears to fit the definition of a ‘predator state’ which, according to economist James K. Galbraith, is “a political system in which a narrow band of elites uses policy instruments for its own benefit, while the rest of the population foots the bill”. That is exactly the reason for the unraveling of the state. What is happening in Balochistan and KP is a symptom of a failing state—A predator State, Zahid Hussain, Dawn, March 26, 2025
The predatory and parasitic elites of Pakistan—militro-judicial-civil complex, businessmen-turned-politicians, mullahs (clergy), pirs (so-called spiritual persons), and absentee landowners—are responsible for the prevailing politico-economic mess. While the country, is trapped in a deadly debt quagmire, every government—military and civilian alike—has been begging for bailouts and then ironically celebrating tranches (read subjugation), yet claiming self-reliance soon! What an oxymoron!!
We keep on hearing about reforming the tax system with borrowed funds from World Bank, Asian Development Bank etc., but the elite shamelessly use the Federal Board of Revenue (FBR) as a tool to get unprecedented tax breaks.
FBR has been made completely ineffective in taxing enormous assets owned and/or enjoyed by the elites. Adding insult to injury, members of the parasitic elites enjoy a life of luxury at taxpayers’ expense—free utilities, perks, perquisites, plots, clubs, golf courses, medical treatments abroad, etc.
As a result of public funding and non-taxation of commercial activities/properties of elites, e.g. clubs, guest houses golf courses, etc. as well as unprecedented exemptions given to generals, judges, and high-ranking civil officials, the national kitty suffers huge losses (tax expenditure). The withdrawal of exemption waivers and recouping of the losses alone can substantially increase our tax-to-GDP ratio (pathetically low at 9.5% in fiscal year (FY) 2024 and 4.9% in the first half of current FY 2025).
The oft-repeated sickening narrative that Pakistanis do not pay taxes, popular with Revenuecracy, international lenders and donors, analysts, TV anchors, academicians, and policymakers, is false and deceptive.
The reality is that the poor and middle-class salaried persons, earning below taxable income, are victims of oppressive indirect taxes. Paying as high as 19.5% provincial sales tax on mobile use, 18% federal sales tax on items of daily use such as flour, rice, sugar, salt etc. (sold under brands) and now as high as Rs. 70 per litre as petroleum levy.
Even the poorest of the poor getting support from the State, prepaid or postpaid mobile users, are paying in addition to 19.5% sales tax on services to provinces, advance adjustable income tax of 15% and 75% in case of those mentioned in the General Order issued under section 114B of the Income Tax Ordinance, 2001.
Over 145 million broadband and internet users are paying above-mentioned enormous taxes as well as direct and indirect taxes along with utility bills, yet our rulers have the cheek to keep on telling the nation that they are serious in boosting exports of information and communication technology (ICT) products! They even have no clue about the nature and real quantum of ICT goods at global level!
While the masses, especially middle-class salaried persons, and the corporate sector are being crushed under confiscatory taxes, the parasitic elites of our extractive state, are thriving on taxpayers’ hard-earned money. Media in general is not inclined to expose the obnoxious role of the predatory/parasitic elites in destroying the economy and state institutions. Media owners and all-knowing anchors, being beneficiaries of the exploitative system, cunningly divert the attention of the masses towards trivial issues through hollow talk shows.
Citizens whose incomes fall even below taxable limits under the income tax law are criminally taxed through the cleverly woven web of withholding tax regimes
The parasitic/predatory elites have only one agenda: self-aggrandisement. The concentration of power and wealth in their hands, coupled with lust for control, has given rise to perpetual institutional confrontations, social unrest, and economic disparities. The unholy alliance between politicians (lawmakers), state functionaries (administrators), and unscrupulous traders (law-breakers) is the root cause of our many ills—including politically motivated loan write-offs and flight of capital from the country leaving the masses in miserable conditions. Billions have been lost annually due to this unholy alliance.
Since the rich and mighty do not pay due taxes, regressive taxes are imposed hurting the poor, middle-class, and fixed-salaried employees. On the one hand, Pakistan is a country with one of the lowest tax-to-GDP ratios, and on the other, the bulk of the collection is wasted mercilessly for non-productive expenses—funding monstrous state machinery and luxuries of the elites. Adding insult to injury, tax expenditure in the last three years on average was Rs. 3.5 trillion—it will cross the Rs. 4 trillion mark this year.
What makes the situation more painful is the fact that predatory/parasitic elites grab state property under the pretext of rewards and awards (free or at throwaway prices) and pay no tax on it. Taxes ruthlessly collected from the masses are brazenly spent on their luxuries—palatial bungalows, fleets of cars, an army of servants, foreign tours, and whatnot.
Tragically, citizens whose incomes fall even below taxable limits under the income tax law are criminally taxed through the cleverly woven web of withholding tax regimes. Funds extorted from their hard-earned money, are plundered and wasted on luxuries of State Oligarchy, while the predatory/parasitic elites (state functionaries) do not pay tax on free or concessionary benefits and/or plots allotted in utter violation of section 13(11) and sections 39(1)(j) of the Income Tax Ordinance, 2001.
During the government of Pakistan Peoples Party (2008-13), an ex-member of FBR wrote a letter to then Finance Minister, Abdul Hafeez Shaikh, that massive tax evasion/loss of revenue had occurred due to non-taxation of government property/benefits given to high-ranking officials either free or at concessional rates. He, as expected, took no action and the same was the case when Muhammad Ishaq Dar took office in 2013 and Miftah Ismail at the fag end of the government of Pakistan Muslim League (Nawaz) in 2018.
As the mighty scions of society are not paying taxes due from them, the common people argue against discharging their tax obligations, especially when the State has failed to protect their lives and properties
The first Finance Minister of Pakistan Tehreek-i-Insaf (PTI), Asad Umar, and State Minister for Revenue, Hammad Azhar, also did not bother to examine the matter despite being specially briefed. The same was the case with Abdul Hafeez Shaikh and Shaukat Tarin succeeding Asad Umar.
After the end of the PTI alliance government in April 2022, the finance ministers of the Pakistan Democratic Movement (PDM) showed no interest, and the same is the case with the Finance Minister, Muhammad Aurangzeb, of the incumbent government!
All the heads of FBR since 2009 also remained silent on this issue. The track record of the present Chairman FBR, Rashid Mahmood Langrial, shows that he would be least interested to nab his rich and mighty colleagues in civil services, what to speak of recovering lost tax from men in khaki and robes, beneficiaries of state lands!
Occupying lucrative posts in Punjab under self-proclaimed Khadim-e-Aala and later in the centre as his blue-eyed boy, Mr. Langrial has never bothered to ask the field officers to collect taxes of billions from the beneficiaries of loan write-offs as windfall income, despite the availability of published data of all banks. However, he is overenthusiastically extorting undue taxes from the banks, even billions in advances, not yet due!
The Prime Minister has praised not only Mr. Langrial for recovering windfall tax from banks but also many officials including the Intelligence Bureau DG and DG FIA—one wonders what role did they play in vacating stay of recovery and for favourable adjudication?
Mr. Langrial, despite tall claims, has been unable to grab about 4 million ultra-rich (these include his colleagues in bureaucracy in addition to politicians, judges, generals and traders) for understatement of incomes/assets. Until today, he has even failed to force two million citizens, who live lavishly, to file their income tax returns, what to speak of taxing the ultra-rich and mighty members of the State Oligarchy.
The people voted for PTI in 2018 so that they would take the powerful elites and tax cheats to task, but it acted callously as its predecessors, who were protecting them. Since 2009, after the revival of so-called democratic rule, citizens wondered why FBR under PPP and PMLN had been sparing tax-delinquent elected members (99% of them did not even bother to pay the Income Support Levy for tax year 2013 imposed by Ishaq Dar but abolished the very next year)!
All civilian governments since 2009 failed to collect due taxes from unscrupulous traders, mighty military, and civil-military officers for not voluntarily discharging their tax obligation under section 13(11) read with sections 39(1)(j) and 68 of the Income Tax Ordinance, 2001. Recouping of lost revenues of billions of rupees from them could have certainly conveyed a loud message to all that the elected governments were serious and that nobody was above the law.
As the mighty scions of society are not paying taxes due from them, the common people argue against discharging their tax obligations, especially when the State has failed to protect their lives and properties, what to talk of providing basic facilities of education, health, clean drinking water, housing, transportation, etc.
The powerful members of the State Oligarchy in the Land of Pure live in palatial homes with free utilities and enjoy free and/or subsidised facilities for golfing and club life—all at the expense of taxpayers’ money. The poor and have-nots are suffering from hunger and malnutrition. About 120 million lack even basic facilities like clean drinking water, sewerage, etc.
Not only that the powerful do not pay taxes on perks/benefits/plots, but there exists within a specific group blatant discrimination. For example, superior judicial allowance of the judges of the Supreme Court and High Courts and almost all allowances, perks, and benefits including pension are exempt under clause (56), Part I, Second Schedule to the Income Tax Ordinance, 2001, whereas judicial allowance is taxable in the hands of judges of the subordinate judiciary. Does this blatant discrimination not call for action on the touchstone of Article 25 of the Constitution of the Islamic Republic of Pakistan?
The judges of the Supreme Court and High Courts, custodians, and guardians of fundamental rights make tall verbal claims about the supremacy of the Constitution, rule of law, justice, fairness, and equality. However, in real life, they have never bothered for a tax waiver for their subordinate judges for judicial allowance, an exemption which they are enjoying! One just hopes that in the forthcoming federal budget, the incumbent Finance Minister will abolish all tax exemptions available to parasitic and predatory elites! __This is an article of Friday Time Pakistan on 29th March 2025
