Pakistan’s tax‑to‑GDP ratio remains among the lowest globally, trailing India by at least 3 percentage points of GDP. The system’s inefficiency stems not only from governance issues but also from structural overlaps: income tax is split between federal (non‑agricultural) and provincial (agricultural) domains, while sales tax divides goods (federal) and services (provincial). This fragmented assignment undermines collection efficiency and equity. This brief calls for revisiting tax assignment and devolving collection mechanisms to strengthen compliance, reduce reliance on indirect taxation, and unlock untapped fiscal potential.
