Pakistan's Tax System: The Illusion of 12 Million Filers and the Story of 7.5 Million Real Taxpayers

A file opens in Islamabad. In the database of the Federal Board of Revenue (FBR), nearly 12 million people are recorded as having once filed a tax return for the purchase or sale of property or a vehicle. But when you dig deeper into this data, a different picture emerges—only 7.5 million people are continuously filing returns. This gap is not just a statistical chasm but points to the fundamental problem of Pakistan's tax administration where 'registration' and 'compliance' have been weighed on the same scale. For me, this figure is like the moment when you look at a cricket scorecard and find that the gap between a batsman's average and strike rate tells the real story of a player. Here too, the figure of 12 million is the scorecard that makes Pakistan's tax base look big, but the figure of 7.5 million is its real strength. To understand this FBR data, you need a basic understanding of Pakistan's tax structure. Under the Income Tax Ordinance in Pakistan, every citizen whose income exceeds a certain threshold must file a return, but also when a person buys or sells property (land, house) or a vehicle, they must report it in their tax return. FBR's IRIS portal allows these returns to be submitted online. The problem is that people who file a return for a one-time property or vehicle transaction do not return to the same portal the next time. FBR puts them in the 'stop-filer' category and keeps sending notices. But these notices are sent via email, and unless that person reopens the IRIS account, they do not even know about their non-compliance status. This is exactly like a cricket team forgetting to update the scorecard after a match and then feeling it has won the game. The most interesting twist in this whole matter came with the Finance Act 2026. Under this law, the government tried to impose restrictions on economic transactions for those who are not continuously filing tax returns. That is, if you are a 'stop-filer,' you will be stopped from buying property, selling vehicles, or engaging in certain large financial transactions. This step sounds tough, but its biggest weakness is that it can also target people who have no regular taxable income. Suppose there is a retired person who has only one plot and wants to sell it. He had filed a return only for this transaction last year. Now if he is not a continuous filer, this transaction may get stuck. This highlights the fundamental problem of the tax system where classification based on 'income' and 'transaction' is not clear. In this whole discourse, there is one aspect that has received very little attention so far—the political-economic context of this FBR database. The delays in implementing the provisions of the Finance Act 2026, or the compromises made, are a direct indication that tax reform in Pakistan is not just an administrative matter but a game of political will. When you connect 12 million people to the tax system, it is not just a number—it is a class that can play a significant role in electoral politics. In such a situation, it becomes necessary for the government not to antagonize these people. This is why even after announcing restrictions, there is hesitation in fully implementing them. This is exactly like a situation where a cricket board is under pressure from sponsors—you make rules, but you cannot be too strict in enforcing them because you know it will affect both your revenue and popularity. Now look at this figure from another side. How many of the 7.5 million continuous filers actually pay tax? FBR's data does not make this clear. But those who closely observe Pakistan's tax system know that a very large number file zero returns or pay nominal taxes. That is, even the figure of 7.5 million does not tell the whole story. The real challenge is how to broaden the tax base and connect those who are outside the system. Pakistan's tax-to-GDP ratio is around 10-11 percent, one of the lowest in South Asia. This figure shows that merely increasing the number of filers is not the solution; increasing collection capacity is necessary. For me, this is the same situation when you play 60% dot balls in cricket and think you have won the match—the strike rate remains where it was. There is also a fact in this whole discourse that the manner of sending notices by FBR is the root of the problem. When a person does not log in to the IRIS portal, there is no other way to receive the notice. Mobile numbers, addresses, or other contact means are not updated. This situation is like a cricket team that does not update the scorecard after a match and then feels it has won the series. FBR's system needs improvement—contact through multiple channels, clear instructions, and most importantly, a simple process for non-income earners. What if the government creates a system where there is a separate category only for property or vehicle transactions and there is no need to file continuous returns? This will benefit both—the administrative burden will reduce and the common citizen will not be troubled. Finally, one aspect of this whole matter that is often missed is the quality of data. If FBR's 12 million figure is not properly classified, it can mislead policymakers. When you think you have 12 million taxpayers, you will try to convert them into continuous filers. But if you know that 4.5 million of these have filed a return for a one-time transaction only and there is no need for them to become continuous filers, your policy will change. This is the core message of this report—Pakistan's tax system needs to move out of the 'illusion of numbers' and focus on 'quality.' Until FBR cleans up its own database, tax reform talks will remain confined to papers only. And just as hitting only sixes and fours does not work in a cricket match, merely increasing the number of filers will not bring real compliance in the tax system. What is needed is a balanced, clear, and just system that understands the situation of every citizen and sets expectations accordingly.