Unfair tax system

THE disclosure that the FBR collected nearly Rs1.9tr in sales and income taxes through electricity bills over the past four years is hardly a matter of pride. Indeed, it shows that the tax system has come to depend on extracting ever more money from those it can easily reach rather than bringing the vast number of untaxed into the net. The revelation that Rs400bn to 500bn in adjustable income tax withholding goes unclaimed annually further exposes the system’s flaws: those outside the formal tax net are content with paying indirect taxes rather than entering the tax system, while those not liable to pay taxes keep bearing the burden because the state has chosen the easiest point of collection. The cumulative burden of electricity consumption and income taxes falls disproportionately on ordinary households.

The FBR chairman told a parliamentary panel recently that the sales tax bill included ‘normal sales tax, extra tax, further tax and tax on electricity supplied to retailers’. Income tax, meanwhile, was withheld from industrial and commercial consumers and even domestic consumers. He warned that electricity could face more taxes, arguing that it receives the highest concessions. But how much more can consumers be expected to bear? Electricity bills are already burdened with high tariffs, debt and other surcharges, fuel adjustments and an array of levies. A panel member rightly described tax collection through electricity bills as “tantamount to coercion”. That the state is using electricity bills as a convenient collection mechanism means it is effectively forcing millions to pay taxes before establishing whether they are actually liable to do so. This is hardly sound fiscal policy. Nor is it sustainable. The failure lies in the state’s approach to taxation. Revenue collection has become an end in itself, while the more difficult task of broadening the tax base is repeatedly postponed. A state that cannot distinguish between a taxable citizen and a non-taxable consumer is making taxation more coercive.

Published in Dawn, July 31st, 2026

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