Pakistan Economy
Pakistan Economy: The war on Iran has created a major shock for developing countries. The country depends heavily on imports like energy, food, and raw materials. Overseas Pakistanis send money home. These remittances support millions of families and help the economy. Pakistan also relies on the Gulf region for trade and finance. This increases its exposure to the conflict. The country has very limited reserves in energy, foreign exchange, food, and fiscal space.
Debt and Fuel Burden
Pakistan also struggles with high public debt. The government pays large amounts in interest. The tax base remains narrow. The government collects most taxes from the same groups. These include corporations, imports, salaried people, and ordinary citizens through indirect taxes.
The government raised petroleum levies to cover tax shortfalls. This decision increased fuel prices sharply. People had to pay more at petrol pumps. Public pressure forced the government to reduce some taxes. However, fuel taxes remain high. Petrol affects almost every sector. Higher fuel prices increase the cost of transport, food, and electricity.
Rising Fuel Inequality
Poor households suffer more from these increases. They may spend less on fuel directly. But rising prices in other areas increase their burden. Studies show that Pakistan has one of the highest petrol prices compared to income.
The government now depends more on fuel taxes. In 2022, petrol taxes were below 10%. Now they have risen sharply. Fuel taxes make up a large share of total revenue. This shift makes the tax system more unfair for low-income groups.
Unequal Taxes and Evasion
The tax system also treats businesses unequally. Only a small number of companies pay most taxes. Thousands of firms remain outside the tax net. A few large companies carry most of the burden.
Tax evasion remains a serious issue. Many sectors avoid taxes through smuggling and underreporting. These include cigarettes, tyres, tea, and beverages. The government introduced track-and-trace systems. These efforts have shown limited success. In the cigarette sector, many firms pay little tax. A few major companies pay most of it. This causes huge revenue losses.
Narrow Tax Base Crisis
The government has failed to expand the tax base. It relies on a few sources like fuel and imports. This approach increases pressure on businesses and ordinary people. It also makes the tax system more unfair.
Published in Dawn,18th April 2026
