Pakistan’s tax-to-GDP ratio has stayed stuck between 9.0 and 10 per cent for years. This is one of the lowest ratios in the world. Yet, the purchase of luxury goods keeps rising. High-end cars, SUVs and pickup trucks with their groups of armed security personnel are visible on the roads of every major city.
The contrast is stark. The state is short of money, but the public display of wealth keeps expanding. This gap reflects a larger truth. Pakistan is a poor country with many rich people who are tax scofflaws.
For decades, governments have relied on the same methods to improve tax compliance. They follow money trails through company accounts, property registries, bank statements and offshore holdings. These strategies have had little effect. The Panama Papers were called a turning point but produced more noise than reform. The periodic uproar about Pakistanis owning luxury apartments in Dubai also went nowhere. The reality is simple. Foreign assets lie outside Pakistan’s jurisdictional reach. Besides no government has the willingness or the capacity to follow through.
But one form of wealth cannot be transferred abroad or hidden behind offshore companies. It moves around us every day. In a low-compliance environment like Pakistan, luxury vehicles are the clearest and most public indicator of financial strength. You can hide a bank account in Dubai. You cannot hide a Rs30 million luxury car in Gulberg or Clifton.
If Pakistan wants to widen its tax base, it must stop searching only where wealth disappears. It must also look at where wealth is openly displayed. Pakistan should introduce a Wealth Clearance Certificate (WCC) for owners of luxury vehicles.
The WCC concept is straightforward. Anyone purchasing or owning a vehicle worth more than, say, Rs10 million, or with an engine capacity above 1500cc, must first prove three things: that they are registered tax filers; that their declared income supports such a purchase: and that they have listed the vehicle in their wealth statement.
This is not an extreme idea. It follows a logic used in several countries where tax evasion is widespread and traditional methods fail. When declared income is unreliable, consumption becomes a more accurate signal of true financial capacity. Cars, especially luxury cars, are ideal for this. They are visible, traceable and culturally significant as markers of status.
Tax agencies worldwide increasingly use consumption-based indicators to identify potential evasion, especially in countries with a large undocumented sector. Research from developing economies shows that consumption patterns, like owning high-value assets, often indicate true income more reliably than tax declarations themselves. The International Monetary Fund (IMF) has consistently found that asset-based tax enforcement, such as wealth or property taxes, captures significantly more revenue than traditional income-focused methods alone.
A recent example from Turkiye illustrates this clearly. In 2024, Turkey’s finance ministry’s Tax Inspection Board investigated luxury vehicle ownership. It uncovered a stunning disparity. Among nearly 7,885 luxury car owners examined, only 150 had declared any income at all. Of those 150, a hundred reported annual profits below one million liras. This was roughly $30,000 at the time. Meanwhile, they were driving vehicles worth several times that amount.
The investigation exposed numerous individuals with no taxpayer status, no company partnerships and no declared income. Yet they somehow possessed expensive automobiles. The ministry also found cases where company funds were used to buy luxury vehicles without the profitability to justify the purchase.
Turkiye’s experience shows how asset-based targeting works in practice. It uncovers discrepancies quickly. It focuses enforcement on those most likely to be evading taxes. It produces evidence that can hold up in court because the asset is tangible and traceable. Pakistan should learn from this example.
Implementation need not be complex. The Federal Board of Revenue (FBR) already maintains CNIC-linked tax records. Provincial Excise Departments hold vehicle registration data. Linking these systems through a central digital portal is technologically straightforward.
The WCC mechanism would function as follows. Cars and/or pickup trucks exceeding the defined threshold would require a WCC before registration, transfer, or renewal. To obtain one, owners would need to show they are registered tax filers. They must show the vehicle appears in their wealth statement. Their declared income must reasonably explain the asset’s purchase.
Failures to obtain certification, or discrepancies between declared income and asset ownership, would trigger automated desk audits. This would not involve roadside harassment by uniformed officials. It would rely on system-generated reviews based on objective income-asset mismatches. For enhanced enforcement, digital scanners and license plate readers in urban areas could cross-reference vehicle data with tax records for real-time verification.
If, as expected, the WCC reduces the number of oversized vehicles on our roads, the benefits extend far beyond tax collection.
Public health would improve measurably. Fewer large vehicles mean reduced air pollution. This translates to lower rates of cardiovascular and respiratory diseases. We would see fewer heart attacks, strokes, asthma cases and respiratory infections. Mental health outcomes would benefit from decreased noise pollution and reduced traffic congestion. Road safety would improve dramatically. Larger vehicles inflict disproportionate harm on pedestrians and motorcyclists in collisions.
The country’s balance of payments would strengthen. It would discourage direct imports of oversized luxury vehicles. It would reduce our oil import burden. Further, large landlords earning outsized agricultural incomes usually maintain luxury vehicles as status boosters. The policy thus offers a backdoor mechanism to target incomes derived from agriculture.
There is also another advantage. When luxury vehicle ownership becomes a point of scrutiny, corrupt public officials think twice before displaying illicit income. The ability to parade expensive cars is one of the rewards that enables, and sometimes motivates, corruption in the first place. A verification system weakens that reward. This is the rare government policy that achieves a trifecta: raising tax revenues, advancing climate goals and benefiting public health.
Several objections will inevitably arise. The most serious concern is that such a policy could become a tool for harassment by traffic police. This concern is valid and it must be addressed through design. Enforcement should rely exclusively on digital databases, not physical checkpoints. The system must generate automated compliance checks. It must not create opportunities for roadside shakedowns.
Powerful elites may challenge the measure in court. They will argue it is discriminatory or arbitrary. This risk can be mitigated. We must ensure the requirement is legally sound, uniformly applied, and transparently implemented. The FBR must also be equipped with automated systems to issue certificates quickly and fairly.
For a government serious about reform, the path forward is clear. It must introduce legal amendments authorising wealth-based compliance checks linked to vehicle ownership. It must launch a public awareness campaign explaining the rationale and process. It should pilot the programme in major cities before a national roll out.
The government should also offer a six-month amnesty window. During this time, luxury vehicle owners can declare their assets and file tax returns without penalty. It should also digitise enforcement completely to prevent corruption and may consider rewarding compliance with fast-track services or reduced renewal fees for verified filers.
The gap between Pakistan’s actual wealth and declared wealth remains considerable. The evidence is parked in front of us at every traffic signal. If the country wants a tax system that is fair and respected, it must stop pretending that luxury consumption has no connection to taxable income. A WCC is not a radical idea. It is a practical tool that uses visible facts to fix a problem that has yet to be tackled effectively.
The writer is a group director at the Jang Group. He can be reached at: [email protected]
