Tax Justice in Pakistan: Urgent Reforms Needed to Reduce Inequality and Ensure Sustainable Economic Growth

Pakistan’s economy is currently at a critical crossroads, and tax justice has become a national necessity rather than just a policy discussion. With rising inflation and wealth concentrated among a small elite, structural fiscal inequities threaten social stability and sustainable economic growth. Experts, including international economist Thomas Piketty and Pakistani specialists, have emphasized the urgent need to reform the tax system, reduce regressive taxation, limit elite privileges, and overcome political resistance to ensure a fair and equitable economic structure.

Tax justice in Pakistan refers to a system where taxation is proportionate to income and wealth, ensuring fairness and transparency. The current reliance on indirect taxes disproportionately affects lower-income citizens, while wealthier groups contribute minimally. This imbalance creates a dual problem, where ordinary citizens face high consumption taxes and the government relies on borrowing that fuels inflation, while the elite remain largely shielded from contributing their fair share. According to analysts, this structural inequality not only punishes the majority but also undermines long-term economic growth, making reform both an ethical and economic necessity.

Global examples demonstrate that high inequality is not essential for economic growth. Historical data from the United States shows that top income tax rates once reached 91 percent without negatively impacting productivity. Sweden transformed from one of Europe’s most unequal societies into a highly egalitarian nation through progressive taxation and institutional reforms. Piketty’s concept of predistribution emphasizes preventing excessive accumulation of wealth before it distorts the broader economy. This approach could help Pakistan foster inclusive economic growth rather than extractive concentration of wealth among elites.

In Pakistan, inequality is largely a political construct. Wealthy elites dominate major political parties, creating resistance to reforms that would impose fair taxation. This results in policy frameworks that protect the affluent while ordinary citizens bear the brunt of indirect taxation and fiscal pressure. Capital flight and financial secrecy further undermine fiscal equity, making it difficult to achieve sustainable revenue generation. Addressing these challenges requires both institutional reform and mobilization of the majority to advocate for fair fiscal policies.

Potential reforms to promote tax justice in Pakistan include introducing progressive income and wealth taxes to ensure that high earners contribute their fair share, closing loopholes that facilitate tax avoidance, and taxing untaxed assets. Implementing a gradual universal basic income can provide financial support to marginalized populations, stimulate domestic consumption, reduce poverty, and promote inclusive participation in the economy. Predistribution strategies that limit excessive executive compensation, encourage equitable corporate profit-sharing, and strengthen labor protections can address structural economic imbalances before they escalate into extreme inequality.

The challenges to implementing these reforms are significant. Elite resistance, inefficient tax administration, and the prevalence of offshore accounts make enforcement difficult. Mobilizing citizens, strengthening institutional frameworks, and fostering public awareness are critical to overcoming these obstacles. Reforming the tax system can reduce inflationary pressures caused by excessive borrowing, improve social stability, expand domestic consumption, and broaden the tax base for long-term sustainable growth.

To achieve meaningful change, Pakistan must focus on efficient tax collection and enforcement, public education about the benefits of equitable taxation, political advocacy for inclusive fiscal policies, and international cooperation to address tax evasion and financial secrecy. Urgent action is required to prevent further social and economic imbalance, and collective efforts from citizens, civil society, and policymakers are essential to dismantle systemic inequality.

Implementing tax justice in Pakistan is not only an ethical obligation but also a practical strategy to ensure economic stability and inclusive growth. Progressive taxation, universal basic income, predistribution measures, and institutional reforms can transform the economy into a system that benefits the many rather than a privileged few. Ignoring tax justice threatens long-term prosperity, while decisive reforms can create an equitable, stable, and sustainable economic future for the country.