Islamabad

Amidst ongoing negotiations for a new International Monetary Fund (IMF) bailout, a financial bill was passed by Pakistan’s parliament last Friday, imposing heavy taxes for the 2018 fiscal year. Experts have criticized the flawed tax system for increasing financial burdens on the public and contributing to economic inequality.

Pakistan continues to struggle with a low tax-to-GDP ratio, despite aiming to collect 13 trillion Pakistani rupees (PKR) in taxes. Both individuals and corporations face high compliance costs due to the complex tax structure.

According to expert Allauddin Khanzada, inflation has risen sharply by 200–300%, pushing many people below the poverty line, despite income increases of 20–30%. The middle class, once a buffer, has shrunk, leading to a stark divide between the rich and the poor in Pakistan.

The country is in discussions with the IMF for a bailout package worth PKR 6-8 billion to avoid economic default in a region experiencing slow growth. The financial bill proposes a 48% increase in direct taxes and a 35% increase in indirect taxes. Non-tax revenues, particularly from petroleum taxes, are expected to rise by 64%.

Even essential items like tea and matchsticks, along with utilities such as electricity and water, face levies. The government acknowledges poor tax compliance despite these measures, with many being labeled as non-filers unfairly. Khanzada emphasized that the current tax system is outdated and worsens disparities between different income groups.