Beyond Incrementalism: The Case for a National Tax Agency and Fundamental Institutional Reform in Developing Countries' Revenue Administrations in Pakistan

Abstract

The persistent fiscal instability in developing countries, particularly Pakistan, underscores the limitations of fragmented and incremental tax reforms. This paper, “Beyond Incrementalism: The Case for a National Tax Agency and Fundamental Institutional Reform in Developing Countries’ Revenue Administrations (with a Focus on Pakistan),” argues that Pakistan’s enduring revenue crisis—characterized by a chronically low tax-to-GDP ratio, entrenched corruption, administrative inefficiency, and political interference—cannot be resolved through piecemeal changes. It proposes the establishment of an autonomous and unified National Tax Agency (NTA) as a transformative institutional reform capable of addressing these systemic weaknesses. Drawing on comparative case studies from Uganda, Rwanda, and Singapore, the paper demonstrates that operational independence, financial autonomy, and professionalization are critical to effective tax administration. The study further explores the constitutional, institutional, and political economy challenges facing such reform in Pakistan, particularly in light of the 18th Amendment and landmark judicial interpretations concerning fiscal federalism, such as Messers Sui Southern Gas Company Limited v. Federation of Pakistan (2018 SCMR 802). It argues that a carefully designed NTA—aligned with constitutional principles and equipped with transparent governance, technological modernization, and merit-based staffing—could significantly expand Pakistan’s tax base, mobilize up to Rs. 8 trillion in potential federal revenue and foster public trust and compliance. Ultimately, the paper concludes that Pakistan must move “beyond incrementalism” toward disruptive institutional transformation in its revenue administration. Establishing a National Tax Agency is not merely an administrative reform; it is a necessary step toward fiscal autonomy, economic resilience, and sustainable national development.