Pakistanis are famously generous. Ask any uncle at iftar and he’ll tell you how much he gave this year. But when it comes to the state, that generosity mysteriously evaporates.
A recent study found that in 2024, some 50 million Pakistanis donated an astonishing Rs619 billion in zakat alone – more than the Benazir Income Support Programme’s entire disbursement for the same year and more than the federal excise duty the government collected. Yet, when it comes to paying income tax, far fewer step forward. According to the latest FBR data, there are only about 8.07 million active taxpayers on the income tax rolls, a tiny fraction of our adult population that betrays both the narrowness of our tax base and the depth of public distrust in how tax money is spent. Let’s discuss.
Maybe that’s because Pakistanis already feel they are doing their civic duty through charity. Or maybe it’s because the government’s stewardship of public funds has often resembled a magician’s act: lots of noise, a few impressive numbers, a poof of smoke and a big question mark over where the rabbit actually went. If billions vanish into public-sector deficits, recurring budgetary shortfalls, and sometimes into the notorious tax gaps revealed by the auditor general – a staggering Rs789 billion in leaks and irregularities – should anyone be surprised that people prefer to give directly to causes they can witness?
We recently asked a well-placed former official why Pakistanis avoid formal taxation. His answer was refreshingly blunt: “People don’t trust the government. They pay charity because at least they know ‘yeh Allah ki raah mein jayega’.” And who can blame them? When individuals can ensure that a rupee goes to feed a hungry neighbour, support an orphan or retain a teacher in a low-income school, that rupee seems infinitely more useful than when it disappears into the opaque middle of government accounting.
But here’s something that ought to make every patriotic citizen sit up: income and corporate taxes are not trivial to the federal coffers but essential. In FY2023–24, the corporate sector alone paid over Rs3 trillion in income tax, with individual taxpayers contributing over Rs1.1 trillion. These direct taxes form a sizable portion of the FBR’s collections. Without these revenues, Pakistan’s already tight fiscal space would collapse under the weight of debt servicing, recurring deficits and unfinanced public services. Indeed, in the current federal budget, tax revenue collections are projected to be a cornerstone of financing government expenditures.
Therefore, if income and corporate taxes matter so much to the state, why do people duck them while embracing charity? A problem of trust or lack thereof is the rather elementary answer. And that distrust has consequences beyond the symbolic. When citizens feel removed from budget decisions, the government ends up attempting to guess public priorities in suite budget offices. This is not to say that the government is any less aware of where the money is actually required, rather remaining oblivious of its people’s choices.
This observation raises a provocative question: what if taxpayers could decide where their taxes are spent, with accountability and visibility, just as they decide where their charity goes? What if the state trusted its taxpayers enough to let them choose? Would people still balk at income taxes? Would the philanthropic sector shrink or would it thrive with the added legitimacy of taxpayers’ endorsement?
The answer, we suspect, would surprise many. Today’s federal budget finances dozens of sectors: education, healthcare, housing, infrastructure, climate resilience, social protection and more. Yet the public typically has no direct voice in prioritising these sectors beyond periodic grumbling on social media, coffee shops in Punjab or chai bethaks in Sindh. If people were entrusted to allocate their tax contributions to specific sectors – much as they choose to direct their zakat – several things would change.
Under a simple, transparent system, the taxpayer would choose where their money flows at the point of tax filing. When an individual pays income tax through the FBR’s IRIS portal or through withholding mechanisms, they could be presented with a list of broad budget categories with clear descriptions of what each sector needs – from early childhood education in Balochistan to maternal health clinics in Khyber Pakhtunkhwa, from reforming katchi abadis and informal settlements to urban redevelopment (read: honest work) in Karachi or finally lending a motorway to Quetta. The taxpayer would then allocate their contribution across these sectors in proportions of their choosing, much as one designates beneficiaries on a donation form.
To ensure accountability, this system must be paired with rigorous reporting: the government would publish quarterly Tax Allocation Reports that track which percentile of hypothecated taxes goes to which sector, how much was collected and, crucially, what that money purchased. Independent oversight, perhaps through an existing audit institution or a newly empowered Public Tax Allocation Authority, would verify that funds earmarked through this process translated into concrete budget line executions. Annual performance reports would show which projects were completed, which were stalled and how outcomes compared with citizens’ expectations.
Of course, some functions of the state cannot be left entirely to personal preference. Defence, law and order, and macroeconomic stability are non-negotiables – much like salt in food. But they need not consume the entire dish. A reasonable carve-out – a fixed share of income tax reserved for defence and core state functions with the rest open for allocation – could satisfy both national security imperatives and individual choice. What remains under citizen direction would be precisely the discretionary portion of the budget, not the entirety of government spending. This would not only strengthen fiscal federalism but also enable the accumulated public funds to be distributed among local governments, while the centre (read: federal government) is free to feed the goose that lays the golden egg(s).
Critics may worry this sounds like governance by committee, but isn’t it better to have a republic where citizens can say, “I funded the ventilators at Indus Hospital in Karachi” or “I chose to contribute to the upkeep of cultural heritage in South Punjab” than a system where tax revenues disappear into the complexities of general revenue? Examples such as the Shaukat Khanum Memorial Cancer Hospital and The Citizens Foundation’s schools show how Pakistani philanthropy, when administered transparently, delivers world-class outcomes. One must remember that this is less about redistribution and more about prudent reinvestment, strengthening the pillars that support the whole structure.
The idea isn’t to dictate the budget process entirely, but to supplement it with a direct democratic signal from those shelling out the funds. It is participatory budgeting on a national scale: an invitation for citizens to shape, not just fund, the future of their country. If a sector ends up underfunded because people deliberately choose not to allocate their tax there, that is a collective choice and one that the government ought to respect. Meanwhile, philanthropic institutions could still flourish, freed from being the automatic fallback for unmet public needs. At the same time, the government could still finance underfunded sectors through revenue derived from sources other than taxes.
Perhaps this idea sounds utopian, perhaps impractical, perhaps even naive in a country where we struggle to agree on far simpler reforms. But then again, so did the notion that ordinary Pakistanis could fund world-class hospitals and schools without waiting for the state – until they did exactly that. So the real question is not whether this model is perfect, but whether it is worth trying. Should taxpayers be trusted with choice? Would you be more willing to pay if you could decide where your money went? Choice may not solve everything, but refusing to trust it has solved very little.
The writers are lawyers.
