3.3pc of taxpayers contribute 90pc of total IT revenue: experts
ISLAMABAD: Experts at a webinar highlighting Pakistan’s taxation-related challenges have said that only 2.4 percent of the population files tax returns, 55 percent of filers are nil-filers, and 3.3 percent of taxpayers contribute 90 percent of total income tax revenue, reflecting a system that depends on a narrow base.
Speaking at a webinar titled “Reform Programs under Policy Loans in the Power Sector and Tax Administration” organized by the Pakistan Institute of Development Economics (PIDE) here on Wednesday, experts emphasized that digitization efforts like Asaan Tax, MaloomatTaxRay, and Track and Trace have improved accessibility but not compliance, and that true reform requires institutional autonomy, enforcement incentives, and coherent fiscal policy rather than technology upgrades alone.
The event featured Dr. Mahmood Khalid, Senior Research Economist at the PIDE, and Afia Malik, Senior Research Economist at PIDE, while Dr. Ali Salman, CEO of the Policy Research Institute of Market Economy (PRIME), moderated the session.
Opening the discussion, Dr. Ali Salman emphasized the importance of evaluating Pakistan’s reform programs implemented under policy loans from multilateral development partners. He noted that while such loans have shaped the country’s fiscal and energy reform agenda for decades, their effectiveness and long-term sustainability require careful reassessment through local research and evidence-based dialogue.
Presenting his findings on “Policy Loans for Revenue Mobilization,” Dr Mahmood Khalid stated that Pakistan’s tax-to-GDP ratio declined from 10.1 percent in 2023 to 9.6 percent in 2024, compared to an OECD average of 34 percent, while interest payments now consume over 75 percent of total tax revenues. He reviewed major donor-funded initiatives such as TARP (2004–2010), TAGR (2015–2019), and the Pakistan Raises Revenue Project (PRR, 2019–ongoing), observing that despite substantial funding, their outcomes have been limited and often short-lived.
In her presentation on “Policy Loans and Reforms in the Power Sector,” Afia Malik analyzed four completed loan programs since 1994 aimed at restructuring and improving efficiency in Pakistan’s power sector. She explained that while these loans targeted governance enhancement, financial viability, and private sector participation, their implementation failed to achieve commercial independence or efficiency. Privatization efforts, such as those of KAPCO and K-Electric, delivered mixed results, with improvements in corporate governance offset by persistent inefficiencies and tariff distortions. Ms. Malik noted that circular debt emerged after 2006—a problem that was nonexistent before these reforms—and continues to grow despite repeated debt management plans.
She also pointed out that the policy loans encouraged the introduction of RLNG-based power plants, increasing the country’s reliance on imported fuels and raising production costs. While renewable projects were financed, many remain underutilized due to the lack of transmission infrastructure. The unbundling of WAPDA and the creation of multiple entities, instead of improving coordination, led to greater fragmentation, higher administrative costs, and weak regulatory oversight. Ms. Malik emphasized that tariff design remains outdated, uniform across regions, and detached from real costs, undermining sector sustainability. “Despite decades of reforms and billions in financing, the power sector is now more fragmented, inefficient, and costly, with consumers bearing the brunt through higher tariffs and unreliable supply,” she concluded.
Summing up the discussion, Dr. Ali Salman highlighted that Pakistan’s repeated reform cycles under donor guidance point to a deeper governance and ownership challenge. He called for reforms that are home grown, context-specific, and institutionally anchored, emphasizing that sustainable progress requires aligning incentives, strengthening accountability, and building domestic policy capacity rather than relying on externally designed frameworks.
Copyright Business Recorder, 2025