Poor tax design, not evasion, keeps ratio low

Pakistan's tax-to-GDP ratio has remained around 9% to 10% for several decades now – a figure that is alarmingly low for a country of its size and potential. The established explanation for this could be attributed to our culture of celebrating tax evasion, along with a lack of political will for deep structural reforms. But a more accurate diagnosis points towards the overall poor design of our systems. The compliance process is costly, the human actors are corrupt, and the perceived contract between citizens and the state is broken; resulting in rational actors trying to stay outside the system. However, the good news is that this is a solvable problem that countries like Estonia, India, the United Kingdom and Australia have been tackling over the past two decades by using behavioural public policy instruments and insights. Unfortunately, Pakistan continues to head in the opposite...