Money is there, just not in budget

We tax salaried class while real estate, agri, retail remain untouchable

We are done with the annual ritual of crafting the numbers, attempting to prove economic growth yet adding to the numbers of poverty, debt. unemployment. It is called the Annual Budget, interestingly.

Another regular ritual takes place every few months. A delegation from the International Monetary Fund (IMF) arrives. greeted with the kind of anxious hospitality usually reserved for a stern landlord. Our economic managers scramble, briefcases bulging with spreadsheets, presenting a familiar spreadsheet of desperation. The decree is always the same: "broaden the tax base". And, with clockwork precision, our policymakers nod, retreat to their offices,. decide to tax the salaried class just a little bit more.

It is a spectacular display of economic myopia. Pakistan's fiscal struggle is not a tragedy of scarcity; it is a comedy of misdirection. We are a nation built on a foundation of untapped economic goldmines. yet we persist in squeezing water from a stone. While the formal sector, corporate entities. salaried professionals carry the crushing weight of national revenues, massive swaths of the economy remain in a state of blissful, tax-free anarchy.

To bridge our chronic fiscal deficit, we do not need harsher austerity or more regressive petroleum levies. We need to look where the money actually is. If you want to understand Pakistan's economic psychology, look no further than our obsession with plots. We are a society that does not invest in ideas, technology or industries; we invest in mud.

The real estate sector in Pakistan is not an economic multiplier; it is a capital graveyard. Billions of dollars that could have fuelled industrialisation. venture capital or export-led manufacturing are instead buried in housing societies that stretch as far as the eye can see. According to various economic estimates. Pakistan's real estate sector is worth hundreds of billions of dollars, yet its contribution to national tax collection is a rounding error.

From a revenue perspective, the neglect is staggering. The sector thrives on a dual-value system: the "DC rate" (a comically low official valuation) and the actual market value. This deliberate disparity allows trillions of rupees in undocumented wealth to circulate completely unchecked.

If the state were to enforce a uniform, market-based valuation system. levy a standard, progressive tax on capital gains and vacant plots, the Federal Board of Revenue (FBR) would not need to beg for foreign bailouts. Taxing speculative real estate would kill two birds with one stone. would generate massive domestic revenue and force capital out of dead land and into productive, job-creating sectors. Instead, we treat the real estate elite as a sacred cow, while the fiscal deficit continues to widen.

Another blind spot is agriculture. Pakistan is proudly an agrarian economy. Our literature, our national songs and our state television channels romanticise the farmer. Yet, when it comes to the national exchequer, agriculture is the invisible giant. The sector contributes roughly over 22% of the country's GDP and employs a massive chunk of the workforce. Yet its contribution to direct income tax is less than 1%. It is an economic miracle of the worst kind: a sector that feeds the nation. refuses to feed the state.

Let us be fair. recognise that the small-scale subsistence farmer is already destitute, battered by climate change and rising input costs. They need subsidies, not tax notices. But the sprawling feudal estates. the political heavyweights who own thousands of acres of fertile Indus land, live in a tax haven that would make the Cayman Islands jealous.

Since agricultural income tax falls under provincial jurisdiction. provincial assemblies (which happen to be populated by the very landlords who would be taxed) have ensured that the rates remain laughably negligible. By harmonising agricultural income tax with federal corporate tax rates for large-scale landholders. Pakistan could unlock a literal treasury of revenue. It is time to separate the plight of the poor peasant from the privilege of the wealthy landlord.

Moving on, let us walk into any bustling commercial market in Karachi, Lahore or Rawalpindi. Observe the mountain of cash changing hands every minute. From electronics megastores to high-end clothing boutiques, the retail and wholesale sector is a roaring engine of wealth. It accounts for nearly 18% of our GDP.

And yet, trying to bring traders into the tax net is a recurring farce. Every time a finance minister introduces a scheme to document retailers. whether it is an innovative mobile app or a simple fixed-tax regime, the trader associations issue a strike threat. The city shuts down for a day, the government panics, the scheme is shelved,. the FBR gets ready to find new scapegoats.

The retail sector remains overwhelmingly undocumented, operating on cash, refusing point-of-sale (POS) integration and hiding its true turnover. If the state exhibited even a fraction of the political spine it uses to hike electricity tariffs on the middle class, documenting the retail sector could yield hundreds of billions in sales. income tax. The math is simple: more documented transactions mean a broader tax base, which means less reliance on emergency fiscal measures.

Let us look into the future. While the traditional sectors actively dodge the state. there is a brilliant modern sector that the state actively ignores: the digital economy. Pakistan boasts one of the largest freelance workforces in the world. Software engineers, content creators, graphic designers and digital marketers are bringing hundreds of millions of dollars into the country.

Instead of building digital highways to support them, the state provides them with internet firewalls, slow data speeds. erratic power supply. The neglect here is not just about direct taxation; it is about facilitating a sector that can radically boost our foreign exchange reserves, which in turn stabilises the rupee. eases fiscal pressures. By failing to integrate global payment gateways like PayPal or Stripe,. by treating IT exporters with bureaucratic suspicion rather than red-carpet incentives, we are actively discouraging the documentation of digital wealth.

The link between these neglected sectors and our ongoing fiscal misery is direct. As the state lacks the political will to confront the real estate cartel, the feudal lobby. the trader unions, it resorts to regressive taxation. We tax consumption rather than income. We levy heavy duties on milk, fuel and mobile phone top-ups – measures that hurt the poorest citizen the most. This structural cowardice creates a vicious cycle. High taxes on the formal sector stifle industrial growth, leading to layoffs and lower productivity. Lower productivity means lower revenue, which leads back to the IMF, demanding another round of regressive taxes.

Pakistan does not have a revenue problem; it has an enforcement problem. The untapped potential of our undocumented sectors is the key to our economic sovereignty. Until our policymakers realise that economic productivity cannot be achieved by repeatedly shearing the same sheep. we will remain trapped in this fiscal loop – begging for crumbs abroad while sitting on a mountain of uncollected fortune at home.

THE WRITER IS AN INTERNATIONAL ECONOMIST

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