Every spring the same argument comes round. The deficit has to be controlled, debt has to be serviced, the tax-to-GDP ratio has to rise. Targets are announced, rates are adjusted and the Federal Board of Revenue is told to go and collect more.

None of that is wrong. No state functions without revenue. But there is a question we keep stepping over: how much more can you collect from an economy you are not making much bigger?

Last year was, by recent standards, a good one. The economy grew 3.7 percent in FY2026, the fastest in four years, though below the 4.2 percent target. Large-scale manufacturing expanded 6.1 percent, with 16 of 22 sub-sectors growing, and communication and information services rose 7.52 percent. The economy crossed Rs 126.9 trillion, roughly $452 billion, and per capita income reached $1,901. In that same year, poverty rose to 28.9 percent.

Hold those two facts together, because they are the whole argument. Growth went up and so did poverty. Whatever we are doing, it is not yet reaching the people it needs to reach. Simply collecting a larger slice of it will not change that.

Consider what our tax system actually looks like on the inside. The IMF’s most recent assessment found that agriculture produces 24.6 percent of the country’s value added and pays an effective tax rate of 0.3 percent. Petroleum products, at the other extreme, carry an effective rate of 166 percent. That is not a tax system. That is a system that has found a few places where collection is easy and has kept going back.

Sales tax tells the same story. Our standard rate of 18 percent is not low by regional standards, yet the efficiency ratio has slipped from 27.4 percent to 22.8 percent over a decade. Barely a quarter of the theoretical base is actually taxed. We have a high rate applied to a small base.

So when we say the tax net is narrow, we should be precise about who is inside it. Salaried employees, whose income is documented before they ever see it. Registered companies with audited accounts and bank trails. Importers, visible at the port. Anyone who buys electricity, fuel or a mobile top-up. These people are not necessarily the ones best able to pay. They are simply the ones easiest to find. I see the other side of that line most days.

The Punjab Sahulat Bazaars Authority runs markets across the province. The stallholders in those are the real economy in miniature. Most keep no books. Many have no bank account. They buy in cash, sell in cash and settle with suppliers on trust built over years. None of this is secretive. It is simply how business is done when the formal system has never offered them anything worth the trouble of joining. Ask one of them what registration would mean and the answer is not defiance. It is a list: notices, withholding, a consultant’s fee, an inspector at the door. Nowhere on that list there is a benefit.

That is the real reform problem, and it is not a collection problem. It is an incentive problem.

Tax reform cannot be separated from spending reform. People pay more willingly when they can see what comes back — roads that hold, schools that teach, hospitals that treat, offices that respect their time.

Formality has to start paying. If getting documented means you can finally borrow from a bank, that you can bid for a government supply contract, that your paperwork moves faster rather than slower, then the calculation changes on its own. Technology helps here — digital invoicing, connected databases, risk-based audit that keeps officials and taxpayers apart. But technology only speeds up whatever incentive already exists. If the incentive points the wrong way, we will simply digitise the reasons people stay out. The second half of this is growth. It is the half we treat as somebody else’s department.

Investment builds the factories and offices. Those create jobs. Jobs create income. Income creates spending. Profitable firms and higher earnings then produce tax revenue, without anyone having to be chased for it. That is the sequence. We have been trying to run it backwards.

Our investment rate remains below what broad-based growth requires. Exports have been stuck around a tenth of the economy for years. The Survey itself flagged export weakness and a current-account surplus that shrank from $2.1 billion to $72 million. Recovery that runs on imports and remittances rather than on what we make and sell abroad is recovery with a short shelf life.

So the questions worth arguing about are different ones. What would it take for a Pakistani business to go from 20 employees to 200? Why does an overseas Pakistani park his savings in property abroad instead of putting it into something productive here? What stops an exporter in Faisalabad from competing properly in Dubai or London? How do we get more of our young people, and far more of our women, into paid work?

And one more, which we are slowest to ask: how do we make the state itself worth funding?

Tax reform cannot be separated from spending reform. People pay more willingly when they can see what comes back — roads that hold, schools that teach, hospitals that treat, offices that respect their time. Where that return is invisible, taxation stops feeling like a contribution and starts feeling like a levy. Trust is not sentiment here. It is a collection mechanism and it is cheaper than enforcement.

There is also the politics, which everyone knows and nobody says plainly. Every group supports reform right up to the point where it arrives at their own door. Retailers want agriculture taxed. Agriculture points at industry. Industry points at traders. Salaried people, who cannot hide a rupee, ask why anyone else should. Meanwhile the provinces and the federation debate whose job it is.

The way out is a principle, not a negotiation: similar income should be treated similarly, wherever it comes from. Broad, predictable, simple. Exemptions justified by a stated economic purpose and reviewed against it, not by the weight of whoever asked.

Pakistan does need more revenue. With our debt service, our defence requirements and a population still growing fast, nobody serious argues otherwise.

But a government can redistribute economic activity through taxation. It cannot tax activity into existence. Factories have to be built. Farms have to become more productive. Capital has to feel safe enough to stay.

The target was never a higher tax-to-GDP ratio on its own. It is a bigger economy, a broader base and a fairer system at the same time.

We have spent decades getting better at dividing a small pie. The next stage of reform is about baking a larger one — and, given what the poverty number told us this year, making sure the slices reach further down the table.

The writer is a chartered accountant and a business analyst.