Pakistan’s Punishing Tax System and Elite Exemptions

In this Minute Mirror column (January 2026), Dr. Ghulam Mohey-ud-din argues that Pakistan’s tax system breaks the social contract. It falls heaviest on the people who comply, while those with influence or undocumented wealth stay protected.

The argument

The column rejects the idea that Pakistanis are culturally resistant to paying tax. Selective compliance, the author argues, is the product of elite exemptions and discretionary enforcement. Salaried workers and documented businesses are easy to find and tax; agriculture, real estate and wholesale and retail trade generate substantial income but remain under-taxed because their stakeholders are politically powerful.

These incentives shape behaviour. Registering a business formally brings more scrutiny and more tax, so staying informal becomes a deliberate strategy. Enforcement officials hold wide discretion to audit, penalise or ignore, and that discretion tends to follow influence. Firms stay small to stay invisible, fragmenting the economy into units too small to compete internationally.

A narrow base also has fiscal consequences. Governments fall back on indirect taxes, inflation and borrowing, and public services deteriorate, which further weakens willingness to pay. The column’s summary is pointed: the system is less a punishment for evasion than a punishment for honesty.

What needs to change

• Confront entrenched privileges and extend the base beyond those who already comply.
• Reduce discretionary authority in enforcement.
• Align tax rates with actual economic capacity rather than administrative convenience.
• Stop adding new taxes on already compliant taxpayers.

Without these changes, the author concludes, the state will keep losing both revenue and legitimacy.