With a projected net tax revenue of Rs 1.76 trillion, the budget presented by the government focuses on expanding the tax base and targeting non-filers with a carrot-and-stick approach. The measures may seem harsh, but Pakistan has its best chance to generate maximum revenue through taxes. On closer inspection, the cancellation of exemptions on customs duties is a move that will provide incentives for local manufacturers, such as the automobile industry. However, the worrying question pertains to Pakistan being largely an agricultural and livestock economy, where manufacturing and assembly constitute only a minor portion of the industry.

Overall, the incentives remain, and if the government manages to create ease of doing business, some entrepreneurs may take a chance. The strict measures introduced to bring non-filers into the tax net, like travel bans, indirect taxes, fines, and even jail time, indicate that the government is heading in the right direction. The biggest challenge is to bring commercial enterprises, which have made a habit of tax evasion, into the tax cycle. This will ultimately ease the burden of sales taxes on the general public.

Real estate and the salaried class may feel the burden of the new tax regime, but these measures are crucial in the bigger picture of stabilizing the economy and creating a sustained source of revenue. The exemption for annual incomes less than Rs 600,000 means that the class most affected by inflation will not have to bear an added back-breaking burden of taxes. Those who earn more will pay more taxes.

Out of little choice, the intent of Pakistan’s new taxation policies, as announced in the budget, is to create a self-sustaining economy. However, when people are facilitated with simultaneous development, they are more likely to feel the burden of taxation less. Although the government does not have a hefty amount for development, its top priority should be to make life as easy as possible for Pakistanis.