Tax evasion in Pakistan has a significant impact on human development, hindering the provision of public services, exacerbating socio-economic disparities, and impeding progress towards sustainable development goals. The informal economy, rampant smuggling, and under-invoicing in sectors such as tea, automotive, pharmaceuticals, and real estate contribute to substantial revenue losses for the government.
Estimates show that the shadow economy accounts for approximately 40% of Pakistan’s GDP, highlighting the scale of tax evasion. The tea industry is particularly affected by smuggling, with loose tea posing health risks due to adulteration. The automotive sector, including the tyre market, experiences substantial tax evasion through illegal trade. In the real estate sector, under-invoicing and undervaluing properties during transactions contribute to significant revenue losses.
Efforts to combat tax evasion, such as valuation tables and legislative reforms, have faced challenges due to pressure from stakeholders and outdated land classification methods. The tyre industry, in particular, has seen substantial tax losses due to illicit trade and weak enforcement mechanisms. Similarly, the tea industry faces challenges from smuggling and limited tax enforcement in rural areas.
Addressing these issues requires stronger enforcement mechanisms, stricter regulations, and public awareness campaigns to discourage the use of counterfeit products and ensure economic stability and public health. The writer emphasizes the need for legislative reforms, improved valuation methods, and enhanced documentation practices to effectively curb tax evasion and promote transparency in Pakistan’s real estate sector.