Representation without taxation

EDITORIAL: The opposition expressed by lawmakers from Khyber Pakhtunkhwa to the imposition of taxes in the merged districts and Malakand reflects a familiar pattern in Pakistan’s fiscal politics.

The demand is presented as a defence of historically disadvantaged regions that have endured conflict, displacement, weak infrastructure and prolonged neglect. Those grievances are legitimate. The conclusion drawn from them, however, is not.

The principle of “no taxation without representation” arose in a very different constitutional setting. The American colonists objected to taxes imposed by a parliament in which they had no elected representation.

The issue was not taxation in itself, but the absence of political consent and accountability.

That argument does not readily apply to the merged districts of former FATA or Malakand. These areas are represented in the national and provincial legislatures. Their elected representatives participate in lawmaking, budgetary debate and the allocation of public resources. They are not excluded from the institutions imposing taxation.

On the contrary, they are using those institutions to seek continued exemption from obligations applicable elsewhere.

Representation carries the right to question taxes, challenge their incidence and demand accountability for their use. It does not imply a permanent right to remain outside the tax system.

There is, of course, a strong case for additional public spending in the affected areas. The merger of the former tribal districts was accompanied by commitments concerning infrastructure, administrative integration, policing, justice, education and healthcare.

Many of those commitments have been implemented slowly or inadequately. The federal and provincial governments must therefore be held accountable for delayed transfers and weak execution.

But the failure to deliver development commitments cannot by itself justify indefinite tax exemptions. The two issues are related, but they are not interchangeable. One concerns the state’s obligation to address historical deprivation.

The other concerns the obligation of economically capable citizens and businesses to contribute to public revenue.

A tax exemption based solely on geography is also a blunt instrument. Poor households with little or no taxable income derive limited benefit from income-tax concessions.

The principal gains accrue to businesses, traders and asset owners with taxable activity. In practice, the policy may protect commercial interests more effectively than vulnerable citizens.

It also creates distortions between firms operating in neighbouring areas. Businesses subject to normal taxation are placed at a disadvantage when competitors benefit from exemptions merely because they operate across an administrative boundary.

Such arrangements invite tax arbitrage, weaken documentation and create incentives to route goods or transactions through exempt jurisdictions. This is difficult to defend on grounds of either fairness or economic efficiency.

The broader national context makes the argument more problematic. Pakistan’s fiscal system already relies excessively on a narrow group of documented taxpayers, including salaried individuals, formal companies and consumers of taxed goods and services. Large segments of retail, agriculture, real estate and the informal economy remain lightly taxed or inadequately documented.

The result is predictable. Because the base remains narrow, governments repeatedly increase the burden on those already within the Tax net. Resultantly, tax rates rise, withholding mechanisms expand and indirect taxation assumes greater importance.

The system becomes increasingly inequitable, while resistance to taxation intensifies because taxpayers see neither broad participation nor adequate public services.

This is the central fiscal trap. Pakistan collects too little from too few, and consequently struggles to finance the services that might strengthen public acceptance of taxation. Each new exemption deepens that trap.

The claim that services must precede taxation appears reasonable, particularly in regions where the state’s presence has historically been coercive, intermittent or ineffective. Yet taken as a general principle, it becomes impossible to apply.

Public services require revenue. If taxation is deferred until infrastructure, healthcare, education and security meet an acceptable standard most of the country could make the same claim.

The reverse proposition is equally inadequate. A state cannot expect voluntary compliance while offering little transparency, weak service delivery and minimal accountability. The relationship between taxation and public provision is therefore not sequential. Both must advance together.

This requires a fiscal compact rather than either blanket exemption or abrupt withdrawal.

Taxes in the merged districts and Malakand should be introduced through a transparent and time-bound transition. Small businesses and low-income households should be protected through thresholds, simplified regimes and targeted relief. Larger commercial enterprises should gradually enter the normal tax framework.

At the same time, the federal and provincial governments should publish the outstanding development commitments, annual allocations and implementation progress for each affected district.

Such an approach would recognise historical disadvantage without institutionalising permanent fiscal exceptionalism.

Elected representatives have a central role in shaping this transition. They should demand that promised funds are released, development projects are completed and tax measures are calibrated to local economic conditions. They should also insist that the burden does not fall disproportionately on small traders and households.

But an unconditional refusal to accept taxation is not a sustainable policy position. It offers no answer to the country’s narrow tax base, no solution to regional underdevelopment and no credible framework for financing public services.

Pakistan’s fiscal system cannot become equitable while every organised constituency seeks a special exemption. The result of such bargaining is not fairness, but the transfer of the burden to those with the least ability to avoid it.

The merged districts and Malakand are entitled to greater development, stronger institutions and fulfilment of the commitments made at the time of integration. Those claims should be pursued firmly. They do not, however, establish a permanent entitlement to remain outside the national tax framework.

“No taxation without representation” was a demand for political equality. Representation cannot reasonably be invoked as a basis for exemption from the obligations that political equality entails.

Copyright Business Recorder, 2026