High taxes, low services: Pakistan’s economy feeds the few, crushes the productive

Pakistan is facing a deep economic and fiscal crisis, with policies that place heavy tax burdens on a tiny segment of its workforce. The Business Recorder report highlights that only 3.4 million Pakistanis, roughly 4% of the 85.6 million-strong workforce, effectively pay taxes to support the state.

Taxation and public services:

The report argues that citizens are taxed heavily while receiving minimal public services, which are described as comparable to a “medieval fiefdom.” Salaried professionals face a 35% tax rate while still paying out-of-pocket for essentials such as private security, power, and education.

Impact on skilled workers:

The current system has forced around 800,000 skilled professionals to leave Pakistan by 2025. The report states that this exodus is a result of high taxation on a microscopic base, coupled with a lack of trust and transparency in government institutions.

Bureaucracy and state inefficiency:

The fiscal policy is seen as prioritising the maintenance of a “bloated, unproductive bureaucracy” over economic growth. High rates of extraction discourage formal economic activity, keeping the shadow economy intact.

Expert opinions:

While the IMF and state technocrats defend high taxation to meet debt-servicing obligations nearing Rs 9 trillion, analysts argue that such measures reduce trust and volume in the tax system, ultimately stifling economic growth.

The report stresses that Pakistan’s fiscal solvency depends on expanding the tax base and building trust, not merely increasing rates on the few productive taxpayers. Without reform, the country risks continued economic stagnation and further brain drain.