The great tax exodus

TAX evasion significantly impedes human development in Pakistan, hindering the provision of essential public services, addressing socio-economic disparities, and ensuring a sustainable future. Despite efforts to strengthen the tax system, evasion persists, depriving the government of revenue and hindering investment in critical sectors of education, healthcare, infrastructure, and social welfare. This exacerbates inequality, restricts access to services, perpetuates poverty, and obstructs progress towards the Sustainable Development Goals. To grasp the scale of evasion, it’s vital to assess the magnitude of the informal economy. Estimates indicate that the shadow economy accounts for roughly 40 per cent of the nation’s GDP — a cornerstone for evaluating the ramifications of tax evasion on the broader economic landscape. Pakistan, a major tea importer, sees significant tax evasion in the tea industry due to smuggling and illegal trade. The automotive sector, including auto lubricants and tyres, experiences substantial growth fueled by imports, making it vulnerable to tax evasion through smuggling.