ISLAMABAD: Pakistan loses over Rs1 trillion every year due to tax evasion and smuggling in major sectors, but experts say the country can still meet its ambitious tax collection targets if decisive action is taken. During the first half of the current fiscal year, the Federal Board of Revenue (FBR) fell short of its target by Rs545 billion, highlighting massive revenue leakage in the economy.
A study by Ipsos revealed that real estate alone causes around Rs500 billion in annual tax losses, while smuggled and non-tax-paid cigarettes cost the national exchequer another Rs310 billion. Other industries, such as tyres, lubricants, pharmaceuticals, and tea, contribute over Rs200 billion in additional losses.
Macroeconomic analyst Osama Siddiqui said most of these sectors operate outside the formal system, shifting the tax burden onto a small group of compliant taxpayers. This creates a cycle where high taxes encourage evasion and limit business growth. He emphasized that targeted enforcement and plugging loopholes are more effective than increasing tax rates.
Recent operations have also shown the impact of enforcement gaps. For example, authorities seized 3,200 kg of underweight chicken and discarded 100 litres of fake milk, showing the scale of illicit trade.
Siddiqui highlighted that poorly implemented Track & Trace systems in industries make it easier for smuggling and tax evasion to continue. He said the government should focus on bringing undocumented sectors into the tax net and cracking down on smuggling rather than taxing those already compliant.
Strengthening regulatory enforcement and eliminating illegal trade networks are key to achieving tax targets fairly and sustainably, without putting additional pressure on honest taxpayers.
