Can Pakistan Afford to Ignore Tax Justice Anymore?

When French economist Thomas Piketty told a Lahore audience that extreme inequality is not a prerequisite for economic growth, he was not merely revisiting European history — he was holding up a mirror to Pakistan’s present.

Speaking at a panel discussion titled “Building Inclusive Societies: Why Tax Justice, Redistribution, and Predistribution Matter,” Piketty argued that some of the most prosperous periods in the United States and Europe coincided with highly progressive tax systems.

“You don’t need extreme inequality to grow,” he said, recalling how top income tax rates in the US once reached 91 percent without crippling productivity. The real effect, he noted, was not just redistribution but “predistribution” — curbing excessive elite pay before it distorted the economy.

The discussion, moderated by Dr. Farah Said Khan, Executive Director of the Mahbub ul Haq Research Centre and Associate Professor of Economics at LUMS, quickly turned from historical comparisons to Pakistan’s stark realities.

Naseem Beg of the Arif Habib Group delivered one of the most sobering diagnoses of the country’s economic structure: “Pakistan was not born into inequality. It was born as an unequal society,” he said, describing a class system in which an extractive elite operates under a different set of rules.

Beg pointed to Pakistan’s heavy dependence on indirect taxes — borne disproportionately by the poor — as a central injustice.

“We have a double whammy,” he said. “First, indirect taxes that everyone pays. Second, borrowing to cover fiscal gaps, which fuels inflation and becomes another tax on the poor.” With only a tiny fraction of the population paying direct income tax, he argued that the system punishes consumption while shielding wealth.

Piketty reinforced the point by calling inequality a “political construct,” not a natural outcome. Drawing on Sweden’s transformation from one of Europe’s most unequal societies to one of its most egalitarian, he stressed that entrenched elites do not relinquish power voluntarily. “If only the rich are organized, this is not going to work,” he said, underscoring the need for political mobilization and institutional reform alongside fiscal change.

One policy idea that generated both intrigue and skepticism was universal basic income (UBI). Beg proposed a gradual rollout beginning at a fraction of the minimum wage, expanding over seven years and eventually costing about 2 percent of GDP. Beyond poverty relief, he argued, UBI could stimulate domestic consumption, reduce inequality at the base, and even address gender and minority exclusion. “The easiest tool to empower women,” he said, “is direct income in their hands.”

Dr. Farah Said Khan steered the discussion toward the deeper political economy question: who would force such reforms in a system dominated by wealth and power? “Political parties are controlled by the wealthy,” she observed. “They’re not going to volunteer to tax themselves.” Piketty agreed, warning that financial secrecy and capital flight — often facilitated by the global North — further undermine tax justice in countries like Pakistan.

Yet the tone was not fatalistic. Both panelists argued that historical change, though slow and contested, remains possible. “The only strength of the poor is their number,” Piketty said. “They have to build coalitions to change the rules of the game.”

By convening this conversation, LUMS and the Mahbub ul Haq Research Centre placed Pakistan’s fiscal crisis within a global debate on inequality, while keeping the spotlight firmly on local structural failures. The message was clear: without confronting elite privilege, regressive taxation, and political inertia, Pakistan’s economic model will continue to extract from the many to protect the few.

As inflation bites and public trust erodes, the panel’s central question lingers long after the applause: can Pakistan afford to delay tax justice any longer?