Every June, Pakistan goes through the same ritual.
The federal budget is presented, tax rates are adjusted, exemptions are withdrawn, new measures are introduced, and the Federal Board of Revenue (FBR) is handed another ambitious revenue target. Television studios fill with economists, politicians and business leaders debating whether taxes have increased or decreased, whether the salaried class has received enough relief and whether the revenue targets are realistic.
This year was no different.
Until our budgets begin celebrating taxpayer creation with the same enthusiasm that they celebrate revenue collection, we will continue treating the symptoms while ignoring the disease.
To its credit, the government has attempted to ease the burden on salaried individuals by rationalising several tax slabs. For millions of taxpayers, that is a welcome step. It signals an acknowledgement that those already within the documented economy cannot indefinitely shoulder an ever-growing burden.
But while the debate focuses on tax rates, Pakistan continues to ignore a far more important question.
Why are we still trying to collect more from the same taxpayers instead of creating millions of new ones?
That question may well determine Pakistan’s economic future.
Imagine a company whose sales have stopped growing.
Its customer base has remained unchanged for years, competition is becoming more intense, and profitability is under pressure. During the annual strategy meeting, instead of discussing new markets, better products or customer acquisition, management announces a different plan.
“We already have customers. Let us simply charge them more.”
No investor would applaud such a strategy.
No board of directors would approve it.
No serious business could survive on it for very long.
Yet this is remarkably similar to the philosophy that has shaped Pakistan’s tax system for decades.
Governments often celebrate higher annual tax collection. Businesses celebrate a growing customer base.
The difference is profound.
Every successful company understands that long-term profitability depends not on repeatedly charging existing customers more, but on continuously expanding the number of people willing to buy its products.
Governments should think exactly the same way.
The objective should not simply be to collect more taxes.
It should be to create more taxpayers.
Unfortunately, Pakistan has become exceptionally good at measuring tax collection but remarkably poor at measuring taxpayer creation.
That distinction explains why every budget feels more difficult than the one before.
A country of more than 240 million people still depends on a relatively small documented segment to finance a substantial portion of its public expenditure. Salaried professionals, registered companies and compliant businesses remain visible, organised and therefore relatively easy to tax. Large sections of economic activity, however, continue operating informally or remain only partially documented.
The result is a predictable cycle.
Revenue targets increase.
Enforcement intensifies.
Compliance becomes more demanding.
The documented economy pays a little more.
The informal economy continues largely unaffected.
This may improve revenue collection in the short term, but it does not strengthen Pakistan’s long-term fiscal foundations.
In fact, it often weakens them.
Businesses respond to incentives.
When remaining fully documented becomes increasingly expensive while remaining informal continues to provide a commercial advantage, rational businesses adapt accordingly.
Some reduce expansion plans.
Some split operations.
Some increase cash transactions.
Others decide that remaining outside the formal system is simply easier.
The government may collect additional revenue today but loses a much larger tax base tomorrow.
Economists frequently speak about tax rates, but rarely discuss something equally important: the cost of compliance.
For many businesses, taxation is no longer limited to paying the government. It also involves maintaining multiple records, filing numerous returns, responding to notices, interpreting changing regulations, managing overlapping provincial and federal requirements and employing teams of accountants and tax advisers simply to remain compliant.
That cost is real.
For a large corporation, it is manageable.
For a small or medium-sized enterprise, it can become a major barrier to growth.
In effect, complexity itself becomes an invisible tax.
Simplifying the tax system may therefore increase compliance more effectively than introducing another withholding provision.
The discussion becomes even more significant when viewed alongside Pakistan’s growing loss of skilled professionals.
Every week, another doctor accepts an overseas appointment.
Another engineer leaves for the Gulf.
Another software developer begins working remotely for an international employer.
Another accountant qualifies and migrates.
Public debate usually describes this as brain drain.
That description is incomplete.
It is also taxpayer drain.
Consider what Pakistan loses every time one productive professional leaves.
A thirty-year-old engineer or chartered accountant may have another three decades of working life ahead. During that period, they will pay income tax, consume goods and services that generate indirect taxes, purchase property, invest in financial markets, establish businesses, employ workers and contribute to economic growth.
Their employer pays taxes.
Their employees pay taxes.
Their suppliers pay taxes.
Their spending supports hundreds of other businesses.
When such an individual emigrates permanently, Pakistan loses far more than one taxpayer.
It loses decades of future economic activity.
No annual budget captures that loss.
Yet it is one of the country’s highest hidden fiscal costs.
Ironically, Pakistan has already invested heavily in producing these professionals. Families spend years financing education. Universities train them. Professional institutions certify them. Society bears much of the cost of developing skilled human capital.
Just as these individuals reach their most productive years, many conclude that their future lies elsewhere.
Another country receives the benefit.
Pakistan retains the bill.
This is precisely why tax reform cannot be viewed in isolation.
Investment policy, regulatory certainty, judicial efficiency, education, labour markets and taxation all influence the same decision: whether productive citizens choose to build their future in Pakistan.
International experience offers valuable lessons.
Countries that have significantly improved tax collection over the past two decades rarely relied solely on higher rates or stricter enforcement. Instead, they expanded formal economic activity by simplifying tax administration, digitising compliance, improving taxpayer services and creating an environment where entering the formal economy became commercially attractive.
Their objective was simple.
Create more taxpayers.
Not merely more tax.
Pakistan should adopt the same philosophy.
Imagine if every annual budget contained five headline indicators instead of one.
How many new taxpayers were added?
How many new businesses were formally registered?
How many small enterprises entered the tax net voluntarily?
How many skilled professionals remained in Pakistan?
How much did private investment increase?
Those numbers would reveal far more about the country’s long-term fiscal health than revenue collection alone.
Governments cannot tax prosperity into existence.
Prosperity must first be created.
That requires investment.
Investment requires confidence.
Confidence requires predictability.
And predictability requires a tax system that businesses can understand without fearing that next year’s rules will be entirely different.
The encouraging aspect of the current budget is that it recognises, at least in part, the pressure facing the documented sector by providing relief to salaried taxpayers. That acknowledgement is important.
The next step should be even more ambitious.
Pakistan should make entering the formal economy easier than remaining outside it.
Filing taxes should be simple enough for an ordinary citizen to complete without professional assistance.
Documented businesses should receive tangible regulatory advantages.
Tax policy should remain broadly stable over multiple years so that investors can make long-term decisions with confidence.
Most importantly, fiscal success should be measured not by how much additional revenue can be extracted from existing taxpayers, but by how many new taxpayers voluntarily choose to join the formal economy.
That single shift in thinking would fundamentally change Pakistan’s economic trajectory.
Because successful companies never stop acquiring customers.
Successful economies never stop creating taxpayers.
Pakistan does not suffer from a shortage of tax laws.
It suffers from a shortage of taxpayers.
Until our budgets begin celebrating taxpayer creation with the same enthusiasm that they celebrate revenue collection, we will continue treating the symptoms while ignoring the disease.
Real tax reform will begin the day Pakistan stops asking, “How much more can we collect?” and starts asking, “How many more productive Pakistanis can we bring into the formal economy?”
The answer to that question will determine not only the success of future budgets, but the future of Pakistan’s economy itself.
The writer is a financial expert and can be reached at jawadsaleem.1982@ gmail.com. He tweets @JawadSaleem1982