Cooking the Books, Dodging the Bill: Who Really Pays Taxes in Pakistan?

If you flinch each time an electricity bill lands on your doormat or wince when petrol prices edge up again, you already know you are paying taxes. What most people never see is the ledger showing who else is — and more to the point, who is not.

New figures for the financial year that closed on 30 June reveal that the Federal Board of Revenue (FBR) collected a record Rs. 11.74 trillion.

On paper, that sounds like progress: Revenues grew by more than 25 per cent in just a year. Yet the detail behind that headline confirms an old worry.

The same limited group continues to carry the weight — banks, oil and gas firms, power utilities, and salaried workers whose pay cheques are taxed at source — while much of the wider economy escapes serious scrutiny.

These sectors have become the government’s cash cows, consistently milked for revenue while others escape scrutiny.

FBR Chairman Rashid Mahmood Langrial, who took charge last August, conceded as much when the numbers were released.

“We’ve achieved historic collections, but most of the growth came from taxpayers who were already on the books,” he told reporters. “To reach next year’s target, we must widen the base, not squeeze the compliant.”

Look at where the money really came from, and the imbalance becomes clear. Almost half of all direct tax was paid by a handful of large corporate sectors and by employees who have no choice in the matter; their employers deduct income tax before salaries are transferred.

By contrast, the vast retail and wholesale trade, a thriving property market and the agriculture sector, which makes up about 20 per cent of national output, still contribute only crumbs.

Even the flagship textile industry — often the first to seek government concessions — handed over barely a fraction of what the banks or oil companies did.

The state therefore falls back on the easier option: sales tax and federal excise layered onto electricity, fuel, mobile services and consumer goods.

Every time you top up a prepaid phone card or pay a power bill, you are helping to plug the gap left by economic powerhouses that choose not to register or cook the books, underreport their real income.

Economists at independent think tanks warn that this indirect tax model is regressive. It hits the poorest where it hurts — households that have no accountant, no loopholes, and no voice at the policy table.

Provincial governments are meant to help level the playing field, because the Constitution gives them the right to tax services, property and agriculture. In practice, they managed barely six per cent of nationwide receipts last year.

Sindh performed best, followed by Punjab, while Khyber Pakhtunkhwa and Balochistan scraped together a modest sum between them. Until the provinces pick up the slack, the centre will keep passing the buck through consumption taxes.

The coming year will test whether the rhetoric of reform finally turns into action. The federal target for the financial year 2025-26 has been pitched at an eye-watering Rs. 13.8 trillion.

Meeting it, officials insist, will depend not on raising headline rates again but on broadening the tax net.

Plans include wiring 300,000 shops to real-time point-of-sale machines, using artificial intelligence to stop property under-declaration and piloting an agriculture income levy in high-yield districts.

Langrial says ordinary taxpayers deserve to see the burden shared fairly. “We are not after more money from the same pockets. We are building a system where everyone pays their fair share.”

Whether that promise holds will become obvious soon enough. For now, the record haul of the past year means little to families already feeling the pinch from indirect taxes unless the heavyweights still skating by are made to pay their dues.

Table 1: who pays what — sectoral breakdown of income tax

Table 2: category-wise breakdown of tax collection

Table 3: meagre provincial contributions