KARACHI: Mian Zahid Hussain, a prominent business leader and the Chairman of the National Business Group Pakistan, expressed his disappointment over the failure to meet the tax collection target in January, revealing that the tax shortfall had reached a concerning Rs 85 billion. The overall shortfall for the first seven months of the current fiscal year stands at Rs 468 billion. In light of these figures, Hussain stressed the need to focus on expanding the tax net rather than continuously increasing the burden on existing taxpayers.
Hussain pointed out that one of the major reasons behind the shortfall in tax revenue was the government’s policy of increasing taxes without making significant efforts to broaden the tax base. He emphasized that all types of buying and selling transactions should be digitized to discourage cash transactions, which would help bring more businesses into the formal tax system and improve overall tax collection. “We need to digitize the entire process of buying and selling, which would not only streamline tax collection but also minimize the scope for corruption and loopholes,” Hussain said.
The tax shortfall is a result of several factors, one of the most prominent being the lack of trust between taxpayers and tax-collecting institutions. Hussain explained that many taxpayers are reluctant to pay taxes due to a belief that their hard-earned money will not be used for public welfare but will instead be diverted to the authorities. This lack of trust further exacerbates the problem and discourages voluntary tax compliance.
He also pointed out the existence of numerous loopholes in the country’s tax system, which are exploited by both government officials and tax evaders. These loopholes contribute to significant revenue losses for the government, one of the most recent examples being the ongoing corruption within Karachi Customs. The newly implemented “faceless system,” designed to reduce corruption and increase transparency, has been misused by corrupt officials, with some officers already being arrested for their involvement in malpractice. Hussain argued that this misuse of technology underscores the urgent need for stronger monitoring and accountability measures.
Citing recent statements from the Finance Minister and the Chairman of the Federal Board of Revenue (FBR), Hussain highlighted the scale of tax evasion in Pakistan. The Finance Minister revealed that certain large companies are involved in tax fraud amounting to Rs 3.5 trillion, while the FBR Chairman disclosed that the top five percent of income earners evade taxes totaling Rs 1.6 trillion. Hussain called for immediate action against these tax evaders, insisting that such revelations must not go unaddressed if Pakistan is to make any real progress in improving its tax system.
In addition to these challenges, Hussain also criticized the government’s failure to implement fundamental economic reforms, which he believes are crucial for long-term growth. Many experts, he noted, argue that policymakers are focusing too much on rhetoric and short-term solutions, such as increasing taxes, rather than addressing the core issues that affect the economy. These include the continuous subsidies enjoyed by certain sectors, the ongoing losses in electricity and gas distribution, and the widening trade imbalance, where imports continue to outpace exports.
On the subject of rising fuel prices, Hussain expressed concern about the impact on middle- and low-income groups, who are hit hardest by the increase in petrol and diesel prices. Petrol is primarily used in private transport, small vehicles, rickshaws, and two-wheelers, meaning that an increase in fuel prices directly affects the cost of living for these groups. Diesel, used in heavy transport like trucks, buses, and agricultural machinery, also contributes to rising food prices, which further burdens the poor. While acknowledging that global oil price hikes are beyond Pakistan’s control, Hussain stressed that the government must take measures to mitigate their impact on the economy, especially on the most vulnerable segments of society.
In conclusion, Mian Zahid Hussain’s statements underscore the urgent need for structural reforms in Pakistan’s tax system. He called for expanding the tax net to include more businesses and individuals, leveraging technology to ensure transparency, and addressing the widespread inefficiencies and corruption that plague the system. The goal, he emphasized, should be to create a fairer, more equitable tax structure that supports sustainable economic growth and provides adequate resources for public welfare.