Pakistan’s tax reform tragedy is captured in Mir Taqi Mir’s unforgettable couplet: “Mir kya saada hain, beemaar hue jis ke sabab/Usi attaar ke launde se dawa lete hain.” How innocent to seek medicine from the very person who caused the illness. The prescription for the Federal Board of Revenue (FBR) belongs to this familiar dispensary.
For the 19 October 2026 briefing, the Prime Minister’s Office sought restructuring proposals from FBR itself. A newspaper now reports that the government dropped the new-agency idea and sought a staffing plan, alongside proposed statutory powers for redundancy. The prescription has narrowed from institutional reconstruction to personnel management. Necessitating consultation with officers to define its own cure makes accountability a mockery.
The News reports official claims that the tax gap fell from 6 percent to 5 percent of gross domestic product and that 957 contracted auditors expanded audit capacity fourfold. An estimated gap is not cash recovered; more auditors are not proof of better assessments. Neither headline establishes that reform has succeeded.
Consider advance collections from government entities. Parliament should demand an audited reconciliation, showing amounts, legal liabilities, payment dates, funding sources and subsequent adjustments. Where Treasury releases finance premature tax payments, public money circulates from the Federal Consolidated Fund through an entity into tax receipts entering the divisible pool. That changes timing and intergovernmental distribution; it does not demonstrate fresh revenue mobilisation. Tax legitimately payable by a profitable public enterprise is different. The scandal is treating recycled cash or tomorrow’s receipts as evidence of today’s administrative achievement.
The same dishonesty infects performance measured without accounting for unpaid refunds. A collector can improve a monthly scoreboard by withholding another person’s money. An economy cannot grow on that basis.
Every revenue claim should distinguish new compliance from higher rates, inflation, accelerated payments and refund suppression. Until these adjustments are published, celebratory collection figures tell us too little about reform.
This is the revenuecracy we have criticised: policy subordinated to the easiest available collection. Employers, banks, utilities, importers and businesses perform collection functions while citizens finance the compliance burden. Those already visible face repeated demands; influence buys protection for others. Digitising this arrangement may accelerate extraction without making taxation either just or productive.
Shabbar Zaidi’s “PRAL in, FBR out” [Business Recorder, October 16, 2026], challenges bureaucratic control over Pakistan Revenue Automation Limited (PRAL). His second part invokes Brazil’s separate technology provider.
Specialist capacity and reduced personal contact are sensible. The prescription remains half-cooked: it leaves fiscal federalism, taxpayer remedies and the exercise of statutory power inadequately resolved. Brazil’s own official guidance still requires annual fiscal bookkeeping submissions; digitalisation has not abolished annual corporate reporting.
Shabbar’s assertion that the fundamental problem lies in administration rather than policy is particularly unconvincing. Exemptions for favoured interests, taxes disconnected from actual income, excessive transaction withholding and unpredictable changes are policy choices. Better administration cannot make a defective charging rule fair. An efficient system enforcing an unjust law merely delivers injustice faster. Policy and administration must therefore be repaired together.
Nor does a corporate board automatically secure public accountability. Who authorises assessments, corrects inaccurate data, protects confidentiality and compensates victims of unlawful recovery? These questions require legislation, enforceable duties and independent adjudication. PRAL can provide technological infrastructure; its corporate identity cannot substitute for a constitutionally grounded revenue institution.
The Inland Revenue Service Officers Association called for a 19 October strike; the threat was subsequently withdrawn. Two officers were suspended and two recalled for investigation over the statement and stoppage call. These are reported disciplinary measures, not findings of corruption. Cadre protection deserves no veto over reform. Equally, redundancy must not become an instrument of retaliation. Transparent criteria, fair hearings and effective review protect honest officers as well as the public.
The alternative has long been available. We argued for integrated collection in “Case for ‘NTA’”, published in Business Recorder on 27 November 2015. Our books, Tax Reforms in Pakistan: Historic & Critical View and Towards Broad, Flat, Low-rate and Predictable Taxes, document the recurring failures and propose institutional reconstruction. Pakistan does not suffer from a shortage of proposals. It suffers from refusal to implement those that disturb entrenched power.
Establish a National Revenue Agency through a negotiated federal settlement, appropriate legislation and phased integration of collection. Give the federation and provinces meaningful representation, professional management and transparent appointment procedures. Preserve each legislature’s taxing competence and each government’s revenue entitlement. National administration must mean shared ownership, not Islamabad’s takeover of provincial taxation. Begin with common registration, interoperable records and a single taxpayer interface; harmonise returns and audits through agreed arrangements.
Canada offers a useful federal model. The Canada Revenue Agency (CRA) administers federal taxes and most provincial income taxes, with exceptions including Quebec and, for corporate tax, Alberta. Provinces retain policy authority. Eleven of its fifteen board members are nominated by provinces and territories, while the board cannot direct tax-law enforcement. Pakistan should learn from this combination of shared governance and limits on power.
Equally important, CRA administers benefits, including the Canada child benefit and provincial programmes. The revenue relationship thus includes receiving entitlements. Pakistan’s agency should progressively connect tax administration with legislated income support and refundable credits, coordinating existing benefit institutions, protecting personal data and retaining accessible services for people excluded digitally. A poor household should encounter the state as a guarantor of entitlement, not merely a deduction on its electricity bill.
Collection reform must be matched by a National Tax Court. Independence requires judicial appointments, tenure and administration insulated from the collecting authority. Specialist benches, accessible procedures, published reasoned decisions, proportionate costs and enforceable refund orders should replace the taxpayer’s exhausting passage through fragmented remedies. Parliament and provincial legislatures must settle jurisdiction within the constitutional framework, preserving constitutional review. Increasing collection powers while leaving justice inaccessible simply strengthens the wrong side of an unequal relationship.
The policy mandate should be equally clear: broad bases, low and predictable rates, protection of subsistence incomes and removal of unjustified privileges. Rates must follow transparent estimates of revenue and economic effects. Refunds should be budgeted and paid promptly, with compensation for unlawful delay. Officials must not earn rewards for demands subsequently overturned or collections obtained by coercion. Taxpayer rights require enforceable consequences for official misconduct. Without these disciplines, institutional autonomy can become another shelter for arbitrary power at the expense of citizens.
Implementation should start with an independently verified baseline: refunds outstanding, disputed demands, assessment reversals, compliance costs and sustainable additional receipts. Publish the cost and results of every reform project. Set a legislative timetable and phased transition, protecting competent staff through fair selection and retraining. Separate policy formulation from collection, under parliamentary oversight. Judge success by lawful net revenue, voluntary compliance, prompt refunds and fewer avoidable disputes.
The premier should summon evidence, provinces, taxpayers and independent expertise, then require FBR to answer the findings. Another presentation from the same dispensary will produce another prescription for the same disease. Pakistan needs a National Revenue Agency serving the federation and its people, a National Tax Court protecting their rights, and predictable taxes supporting productive activity. Mir supplied the warning long ago. How many more reform packages must we finance before we understand it?
Copyright Business Recorder, 2026
The writer is a lawyer and author, is an Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Senior Visiting Fellow of Pakistan Institute of Development Economics (PIDE)
The writer, an Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds LLD in tax laws