The direct tax illusion

The Express Tribune argues that Pakistan’s reported direct-tax figures overstate how much tax is collected on actual income. In 2025-26, the FBR received Rs13.010 trillion, with Rs6.586 trillion labelled direct taxes, or 5.19% of GDP, but the article says much of this came from deductions and advance payments tied to transactions rather than assessed profits.

The article cites Rs3.654 trillion in withholding and Rs2.208 trillion in advance payments, together accounting for 92.9% of income-tax collection, while only 7.1% came from assessed demand. It estimates that taxation of actual net income is closer to 3% of GDP, and points to Rs629 billion paid by salaried taxpayers alongside limited retailer enrolment and low provincial agricultural income-tax receipts. Its proposed reforms include clearer reporting, timely refunds and broader taxation of income and wealth.