Beyond Public Finance: Towards  Constitutional Po…

The Pakistan Muslim League (N)’s power show in Muzaffarabad during the Azad Jammu and Kashmir election campaign was far more than an ordinary political rally. To me, it marked the re-emergence of Nawaz Sharif as the central figure in Pakistan’s political landscape. The message from Muzaffarabad was unmistakable. Nawaz Sharif spoke of development rather than division, construction rather than confrontation, and public welfare rather than political vendettas. His interaction with the crowd was genuine and heartfelt. One symbolic moment that captured public attention was his light-hearted remark expressing a desire to become the Prime Minister of Azad Jammu and Kashmir. It reflected his affection for the region and the deep emotional bond he has always maintained with the people of Kashmir, whose support has remained consistent throughout his political career. Having covered Pakistani politics for nearly three decades and followed Nawaz Sharif closely since his arrival in London from exile in 2006, I have witnessed every major phase of his political journey. From Duke Street in London, where he addressed party workers during years of political exile, to the massive public gathering in Muzaffarabad, I saw the same determination and resilience that has defined his politics for decades. Few political leaders in South Asia have experienced the highs and lows that Nawaz Sharif has endured. His elected government was overthrown by General Pervez Musharraf in 1999. He was prosecuted, imprisoned and later forced into exile. Years later, he returned to Pakistan and regained political power, only to face another period of legal and political challenges following the Panama Papers case. In my view, elements within the state establishment and parts of the judiciary played significant roles during different phases of these political confrontations. Regardless of differing opinions on those events, what remains remarkable is that every major attempt to end his political career has ultimately been followed by his return to the centre of national politics. Many analysts predicted that the 2024 general elections would mark the end of Nawaz Sharif’s political dominance. I never shared that assessment. Throughout my television appearances and reporting, I consistently argued that he remained the principal decision-maker within the PML-N and that no major political decision was taken without his approval. One of the defining strengths of the Sharif family’s politics has been continuity of leadership. Shehbaz Sharif has repeatedly demonstrated exceptional political loyalty to his elder brother. On several occasions, he chose party unity over personal ambition. Following the difficult electoral environment of 2024, he assumed the office of Prime Minister at a time when Pakistan was facing severe economic and diplomatic challenges. In my assessment, his government helped restore economic confidence, improved macroeconomic stability and steered Pakistan away from a potentially deeper financial crisis. His administrative style has always been focused on governance and delivery rather than political rhetoric. Maryam Nawaz’s rise represents another important chapter in the party’s evolution. During the years when Nawaz Sharif faced political disqualification and exile, she emerged as one of the PML-N’s most visible campaigners. She endured political pressure, remained active throughout the party’s most difficult period and gradually established herself as a national political leader in her own right. As Chief Minister of Punjab, Maryam Nawaz has sought to build her political identity around governance, administrative reforms and public service delivery. Whether one agrees with her politics or not, she has brought energy and visibility to the office and has made rapid implementation of development initiatives a defining feature of her administration. Her speeches continue to energise party workers, while her governance record is increasingly becoming central to the PML-N’s political narrative. When I met Nawaz Sharif and Maryam Nawaz at Jati Umra earlier this year, I observed the same resolve that I had seen nearly two decades earlier during the London exile years. The determination to continue serving through politics appeared unchanged. The Muzaffarabad rally reinforced what I have believed for years: Nawaz Sharif has entered another active phase of his political career. His message is no longer about political survival—it is about political continuity, stability and development. Whether one supports him or opposes him, it is difficult to deny one reality. More than forty years after entering politics, Nawaz Sharif remains one of Pakistan’s most enduring and influential political figures. His resilience has become part of Pakistan’s political history, and Muzaffarabad demonstrated that his political story is far from over. The views expressed in this article are solely my personal observations and political analysis based on decades of reporting on Pakistan’s politics.

The most pitiable creature I know is not the beggar who asks for bread but the gentleman who must borrow a personality. He dresses in another man’s taste, speaks in another man’s phrases and mistakes imitation for refinement. He is everywhere respectable and nowhere original. Nations occasionally acquire the same unfortunate habit. Their politics become echoes, their ideals reflections, and their revolutions little more than borrowed costumes. There was a time when borrowing was the necessity of poverty. We borrowed machines because we had no factories, medicines because we had no laboratories, and books because we had no presses. Such borrowing was neither shameful nor unusual; indeed, civilisation itself advances through exchange. The Greeks borrowed from Egypt, the Arabs preserved and enlarged the inheritance of Greece, Europe rediscovered Aristotle through Muslim Spain, and Japan modernised by learning from the West without surrendering its soul. Borrowing knowledge is the beginning of wisdom. Borrowing identity is the beginning of decline. There is another form of borrowing that no customs official can intercept and no tariff can discourage. It enters silently through the imagination. A society begins by borrowing opinions, then aspirations, then indignation. Before long, it borrows its heroes, its villains, its vocabulary and, eventually, its revolutions. It ceases to ask, “What does our history require?” and instead asks, “Whose history should we imitate?” That, I fear, is the predicament into which much of Pakistan’s public discourse has drifted. During the past several weeks, social media has been flooded with admiration for the recent political resistance witnessed across the border in India. Video clips have travelled faster than thoughtful analysis. Slogans have crossed the Wagah frontier with greater ease than ideas. Among countless young Pakistanis one question has become almost fashionable, Why can’t Pakistan have a movement like this? The question is understandable. It is also profoundly revealing. Hidden within it is an assumption that our political future must resemble somebody else’s present; that history unfolds according to a universal script; that every nation matures by repeating the experience of another. It is an assumption born not of confidence but of intellectual dependency. The tragedy, therefore, is not that Pakistanis admire another people’s courage. Every decent society can appreciate courage wherever it appears. The tragedy is that many have become convinced that courage itself must now be imported. We seem increasingly unable to recognise our own political inheritance unless it first receives foreign approval. This habit is hardly confined to politics. It has become the defining condition of our intellectual life. We borrow theories from European universities before examining our own social realities. We borrow ideological fashions from America before asking whether they illuminate Pakistani society. We borrow debates from social media and mistake them for scholarship. We consume outrage manufactured elsewhere and wear it as though it were tailored for our own circumstances. We have become, in the deepest sense of the phrase, tenants in the house of our own imagination. The irony is painful. No civilisation lacking confidence in itself has ever become creative. Creation begins where imitation ends. Shakespeare borrowed stories but produced Hamlet. Iqbal studied Nietzsche and Bergson yet remained unmistakably Iqbal. Muhammad Ali Jinnah mastered the constitutional traditions of Britain but transformed them into a political movement rooted in the aspirations of Indian Muslims. Great minds borrow raw material; they do not borrow finished identities. The same principle governs nations. Civilisations borrow in order to create. Declining societies borrow in order to imitate. Perhaps nowhere is this confusion more visible than in our understanding of resistance. Resistance has become one of the most romantic words in modern political vocabulary. It evokes images of heroic crowds, defiant slogans, dramatic confrontations and triumphant victories. Social media, with its appetite for spectacle, has transformed resistance into a global performance. Every protest becomes a cinematic narrative; every confrontation seeks an audience; every slogan aspires to immortality through a hashtag. But history is not written in hashtags. Nor are nations transformed by theatrical moments alone. The anthropologist Leila Abu-Lughod offered an important warning nearly three decades ago in her influential essay The Romance of Resistance. She argued that scholars often romanticise resistance as though every act of opposition were inherently emancipatory. Such a view, she suggested, ignores the complex relationships of power, culture and history within which resistance acquires meaning. Acts of dissent cannot be detached from the societies that produce them. They are rooted in particular institutions, historical memories and cultural conditions. Her insight deserves careful attention today. To ask why Pakistan does not produce resistance identical to India’s is rather like asking why the Indus refuses to flow like the Ganges. Rivers obey their own geography. Nations obey their own history. Every meaningful political movement is shaped by its unique historical circumstances. The French Revolution emerged from fiscal collapse and aristocratic privilege. The American Revolution arose from disputes over representation and imperial authority. South Africa’s democratic transition was forged in the struggle against apartheid. None of these experiences can simply be photocopied for another society. History does not distribute identical examinations to different nations. Each country answers its own questions. Yet we continue searching for borrowed answers. Perhaps this is because borrowed revolutions are emotionally satisfying. They spare us the difficult labour of self-examination. It is always easier to admire another nation’s struggle than to confront the unfinished responsibilities of our own. Admiration demands nothing. Citizenship demands everything. That distinction has become blurred in contemporary Pakistan. Our public imagination has fallen in love with the romance of beginning anew. Every few years another movement captures our attention. We invest it with almost mythical expectations. We hope it will accomplish what institutions, constitutions and patient political reform have failed to achieve. We long for redemption through spectacle. But mature nations are not built upon permanent excitement. They are built upon permanent institutions. Hannah Arendt observed in On Revolution that the enduring achievement of successful revolutions lies not in the destruction of an old order but in the establishment of a

Once again, the debate over the creation of new provinces has surfaced in Pakistan. In every political era, the issue is revived in one form or another. This time, however, there appears to be a growing push for creating additional provinces out of almost every major province in the country. The strongest argument being put forward is that Pakistan’s population was around 70 million in 1972, whereas it has now grown to more than three times that figure. Therefore, it is argued, new provinces have become necessary for administrative convenience. At first glance, this argument may sound convincing. But the real question is: can all of Pakistan’s problems be solved simply by creating new provinces? If population growth alone is a sufficient reason for creating new provinces, then why have all major countries in the world not followed the same path? The real issue is not the number of provinces but the quality of governance, equitable distribution of resources, an empowered local government system, transparent accountability and an effective administrative structure. When the basic system is weak, changing the map does not make the problems disappear. What is particularly concerning is that Punjab appears to be the main target of this debate. At different times, proposals have emerged for a separate South Punjab, Central Punjab and even further divisions. It seems that with every political season, Punjab becomes the centre of the debate over provincial division. This has understandably created a feeling among many Punjabis that the issue may not be merely about administrative reform, but could also weaken Punjab’s historical, cultural and political identity. Punjab is not merely another province. It is one of the strong pillars of Pakistan’s ideological, historical and economic foundations. The land played an important role in the Pakistan Movement, made enormous sacrifices for the defence of the country, strengthened Pakistan’s agriculture and industry, and has always played a key role in the national economy. Repeatedly dragging such a province into a debate over division is neither appropriate nor in the national interest. Those advocating new provinces speak extensively about administrative convenience, but remain largely silent about the financial consequences. Has anyone explained to the public that every new province would require a new governor, chief minister, cabinet, provincial assembly, speaker, deputy speaker, secretariat and numerous government departments? There would also be hundreds of new government positions, official residences, vehicle fleets, security arrangements, protocol and countless other administrative expenses. All of this would require billions of rupees. And ultimately, that money would not come from some separate source. It would come from the taxpayers and the public exchequer. Pakistan is already facing one of the most serious economic challenges in its history. The burden of domestic and external debt remains enormous, while a substantial portion of the national budget is spent every year on debt servicing and interest payments. The country continues to rely on programmes supported by the IMF and other international financial institutions, while ordinary citizens struggle with inflation, unemployment and rising electricity, gas and petrol prices. In such circumstances, would creating new provinces and expanding the size of the ruling and administrative machinery really be an act of national wisdom? Or would it simply place another burden on already stretched national resources? If the genuine objective is to serve the people, the existing system should first be made more effective. Local governments must be empowered, district administrations should be given adequate financial and administrative authority, bureaucratic reforms should be introduced, corruption must be tackled and the equitable distribution of resources must be ensured. If the existing system is not functioning to its full potential, how can simply drawing new boundaries across the map transform the lives of ordinary citizens? The issue of dividing Punjab is not merely administrative. It is also a question of identity. Punjab’s language, culture and heritage have already not received the level of official patronage and protection they deserve. If the geographical unity of Punjab is repeatedly subjected to calls for division, it could further weaken its cultural and historical identity. There is another important question: if population is to be the basis for creating new provinces, why should the same principle not be applied uniformly across the country? Will this criterion apply equally to every province, or is Punjab being singled out? National decisions should not be driven by political expediency. They should be based on constitutional requirements, the national interest and broad public consensus. In my view, Pakistan needs a new economic vision, stronger institutions, a fairer system of justice, quality education, better healthcare, greater employment opportunities and effective local governments far more urgently than it needs new provinces. People do not want more rulers; they want better governance. They do not need more official protocol; they need affordable food, quality healthcare, good education and decent employment. As a Pakistani, a journalist and a Punjabi, I believe that dividing Punjab is not in the national interest. Its unity, historical importance and cultural identity should be protected. If we genuinely want to strengthen Pakistan, we should strengthen the system rather than divide provinces, improve governance rather than expand administrative structures, and reduce the problems faced by ordinary citizens instead of placing an additional financial burden on them. The division of Punjab is, in my view, unacceptable. A strong Punjab contributes to a strong Pakistan, and a strong Pakistan should be our shared destination.

For eighteen years, I have made a quiet, sometimes lonely case: that technology, not more paperwork and more offices, is the only honest path to good governance in Pakistan. I did not arrive at this conviction from a textbook. I arrived at it from a desk inside the Planning Commission, watching a system that was designed — on paper — to deliver development, and instead delivered delay, opacity, and grievance. Anyone who has sat through the sanctioning of a Public Sector Development Program (PSDP) project knows the ritual. The feasibility study is glowing. The PC-1 is approved with confident projections. Committees nod. Funds are released. And then the project disappears into the machinery of provincial implementation, where oversight thins out and accountability evaporates. What was promised on paper and what is delivered on the ground are, more often than not, two entirely different stories. I watched this happen again and again, and each time the gap between sanction and delivery was not explained by a shortage of money or expertise. It was explained by bureaucracy — a system built not to serve citizens but to preserve itself. This is not an abstract observation. It is the root of a very real and very dangerous problem. A significant part of the unrest we see in Balochistan, in Azad Jammu and Kashmir, and in Khyber Pakhtunkhwa is not simply about resources or geography. It is about the absence of transparency and the absence of governance that people can see, question, and trust. When a citizen cannot find out where a development fund went, when a project sanctioned in Islamabad never materializes as promised in a district headquarters, when the only visible authority is a bureaucrat with a stamp and a discretionary signature, resentment grows. People do not rebel against distance from the capital. They rebel against being governed by a system that treats them as subjects to be managed rather than citizens to be served. And here is the tragedy that too few are willing to name plainly: the bureaucratic architecture we still operate under was never designed to serve the governed. It was designed by the British Raj to control a colonized population — to extract revenue, maintain order, and ensure that authority always flowed downward from a distant center, never upward from the people. Files, layers of clearance, and the personal discretion of an officer were features of a colonial control system, not instruments of democratic accountability. We inherited that machinery at independence and, astonishingly, kept it largely intact. The tool built to pacify a colony has been repurposed, with barely a redesign, to govern a republic. It should trouble us deeply that a structure engineered to keep a colonized people in check is now one of the principal reasons that Pakistan’s most marginalized regions distrust their own government. So when the conversation turns, as it periodically does, to creating new administrative units — carving out new divisions, new districts, new tiers of provincial machinery — as the answer to Balochistan’s or KPK’s grievances, I feel obligated to push back, loudly. Before we draw a single new administrative boundary, we must confront the core disease, not multiply its symptoms. New units will not dilute bureaucratic power; they will replicate it. Every new administrative tier is another office, another set of discretionary signatures, another opportunity for the same colonial-era logic of gatekeeping to entrench itself further. For the aggrieved citizen in Turbat or Muzaffarabad or Bannu, a new secretariat is not relief. It is simply a new address for the same unaccountable authority. We would be handing the bureaucracy — an institution that has shown a consistent instinct for self-preservation — more territory to govern, not less power to abuse. Real relief requires shrinking the space in which discretion operates unchecked, not expanding the number of desks where it can be exercised. This is precisely why the moment for AI-enabled local governance has arrived, and why Pakistan can no longer afford to treat it as a distant aspiration. Around the world, and notably across India, urban local bodies and municipalities are moving beyond basic digitization toward what might be called algorithms of accountability — systems purpose-built to increase transparency, limit human discretion where it invites abuse, and protect citizen data. These frameworks generally rest on a few consistent pillars: ensuring that automated public decisions on things like welfare disbursement or tax assessment can be audited and challenged rather than buried in a file; protecting citizen data through clear legal safeguards; requiring any private vendor supplying government technology to disclose how its systems work; and actively checking automated tools for bias against marginalized communities. The Indian experience offers concrete, transferable lessons. Municipal bodies in cities like Delhi and Bengaluru now use satellite imagery and mapping systems to flag unauthorized construction and property tax discrepancies — but critically, they pair this with a human-verification step, so an algorithm’s flag is only ever an advisory alert, not a final punishment, creating a documented trail a citizen can actually contest. States such as Telangana and Maharashtra have deployed multilingual citizen chatbots to handle civic complaints, built with data-masking safeguards that strip personal information before it ever touches a broader system. Smart-city command centers in Surat and Pune operate under strict data retention rules, so surveillance footage is automatically deleted unless tied to an active investigation, preventing the machinery from becoming a permanent surveillance state. And where facial-recognition attendance systems have been used to track municipal staff, unions pushed successfully for dispute mechanisms so that a technical glitch never costs a worker their wages. None of these systems eliminate human judgment. What they eliminate is unaccountable, invisible, discretionary human judgment — the exact currency the colonial bureaucracy was built to trade in. That is the reform Pakistan needs at the local government level: not another administrative layer, but a transparent, auditable, citizen-facing system that makes it structurally difficult for a project to vanish between sanction and delivery, and structurally easy for a citizen in the

The recently published PRIME Plus report, An Assessment of the FY2026–27 Federal Budget Through the Lens of Economic Freedom, deserves appreciation for shifting the debate beyond conventional budget arithmetic. Rather than asking merely whether taxes have increased or decreased, it examines whether the budget enlarges or restricts the freedom of individuals and businesses to produce, invest, trade and innovate. That alone makes it a valuable contribution to Pakistan’s policy discourse. The report of Policy Research Institute of Market Economy (PRIME) correctly observes that Pakistan’s formal economy bears a disproportionate tax burden while much of the informal sector remains outside the effective tax net. It questions tax expenditures exceeding Rs 2.35 trillion, highlights the crowding out of private investment by government borrowing, welcomes tariff rationalisation and criticises regulatory uncertainty. These issues deserve much wider public attention. PRIME’s analysis also points towards a deeper weakness in Pakistan’s reform discourse: we discuss economic freedom without first securing constitutional governance. The distinction is fundamental. International indices commonly measure economic freedom through taxation, trade openness, government spending, financial markets and regulatory efficiency. These indicators matter. Lower barriers to enterprise can promote investment, innovation and competition. They answer only part of the question. Why do countries with similar tax rates produce very different economic outcomes? Why do investors accept higher taxation in some jurisdictions while avoiding countries with lighter tax burdens? Why do some economies flourish with relatively large governments while others stagnate despite repeated concessions? The answer lies primarily in institutions. James Buchanan argued that public finance cannot be analysed independently of the constitutional rules under which governments operate. Douglass North demonstrated that long-term development depends upon institutions that reduce uncertainty, enforce contracts and create predictable incentives. Centuries earlier, Ibn Khaldun linked prosperity with justice, moderation in taxation and restraint upon arbitrary power. Excessive intervention, unpredictable fiscal demands and rent-seeking, he observed, ultimately weaken both economic activity and state revenues. These intellectual traditions converge on one central proposition: economic freedom is not created simply by lowering tax rates. It emerges from constitutional governance. Pakistan’s experience illustrates this clearly. Successive governments have offered tax holidays, created special economic zones, reduced customs duties and announced investment facilitation mechanisms. Investment nevertheless remains subdued. Investors do not merely compare tax rates; they compare legal systems. They ask whether contracts will be enforced within a reasonable time, whether regulations will survive political transitions, whether tax liabilities can be altered retrospectively and whether executive discretion outweighs parliamentary certainty. These are questions of constitutional governance rather than fiscal engineering. The same principle applies to taxation. Pakistan’s problem is frequently described as one of high taxation. That diagnosis is incomplete. The deeper problem is unequal taxation. The salaried class in formal sector is fully documented, its tax is deducted before income reaches employees, and its compliance burden continues to rise. Large segments of commerce, services and agriculture operate under very different fiscal realities. The issue is not merely how much tax is collected, but whether equal citizens are governed by equal fiscal rules. A system built around withholding taxes, presumptive taxes, minimum taxes and sector-specific exemptions creates unequal citizenship before the law. It also encourages informality. Businesses do not remain undocumented only because rates are high. Formal participation imposes greater compliance costs while offering few institutional benefits. Documentation without trust becomes compulsion rather than reform. The PRIME report also notes that government borrowing crowds out private investment because banks prefer sovereign lending over commercial risk. This is not simply a banking failure. When governments repeatedly finance deficits through domestic borrowing, banks act rationally by purchasing government securities. Financial markets are responding to distorted fiscal incentives created by public policy. Interest payments and defence together consume nearly 94 percent of net federal revenue, leaving little fiscal space for education, healthcare, scientific research, digital infrastructure, justice administration and productive public investment. The challenge is not merely that government spends too much; it is that public priorities have become distorted. Expenditure that strengthens courts, education, digital infrastructure, research, public health and efficient regulation expands future economic freedom because it reduces uncertainty and lowers transaction costs. Spending absorbed by debt servicing and institutional inefficiency does not. Constitutional Political Economy therefore distinguishes between the size of government and the quality of government. Fiscal federalism is another neglected dimension. The Constitution (Eighteenth Amendment) Act, 2010 reshaped the distribution of fiscal powers. Provincial sales taxes, fragmented administrations and overlapping jurisdictions now influence business decisions daily. Economic freedom cannot be assessed through the federal budget alone. The constitutional structure governing taxation matters as much as the annual Finance Act itself. Pakistan’s economic challenge is consequently larger than budget reform. Markets flourish where laws are predictable, taxation is neutral, contracts are enforceable, property rights are secure and governments remain subject to constitutional restraints. These conditions cannot be created through a single Finance Act. They require a durable commitment to constitutional governance. The value of the PRIME report lies in encouraging this broader conversation. The next step is to recognise that economic freedom rests upon a stronger constitutional foundation. Where constitutional governance is weak, economic reforms remain temporary. Where it is strong, markets can generate prosperity without constant discretionary intervention. Pakistan’s recurring fiscal crises are symptoms rather than the disease. The underlying ailment is institutional. Budgets can redistribute resources, but only constitutional governance can establish equality before law, predictable taxation, secure property rights and meaningful limits on arbitrary state power. Economic freedom, therefore, is neither the starting point of development nor a concession to be distributed through annual Finance Acts. It is the outcome of a constitutional order in which taxation rests on representation, public borrowing is subject to accountability, contracts and property are protected, and executive power remains bounded by law. In a rent-distributing state, freedom is rationed through exemptions, influence and discretion; in a constitutional state, it is secured for all through equal rules. Unless Pakistan reforms the institutions that determine who is taxed, how public money is spent, who bears the cost of debt and how state power is

The second part of this series explained why public finance and Constitutional Political Economy (CPE) ask different questions. Public finance ordinarily examines what taxes governments should impose and how revenue should be spent. CPE asks who makes those choices, under what rules, for whose benefit and subject to what restraints. That distinction leads to an important conclusion: there is no politically neutral tax system. Tax policy is often presented as a technical exercise. Economists compare direct and indirect taxes, estimate elasticity, calculate effective rates and recommend reforms intended to improve efficiency. Governments describe exemptions as incentives, withholding provisions as enforcement mechanisms and consumption taxes as instruments of broad-based revenue mobilisation. Such terminology creates the impression that taxation operates independently of political power. It does not. Every tax decision identifies those who will pay, those who will collect, those who will receive concessions and those whose activities will remain beyond effective enforcement. A tax may be neutral between two products in an economic model, but the process through which it is enacted and administered can rarely be neutral between organised interests, social classes or political constituencies. The Organisation of Economic Cooperation and Development (OECD) itself recognises that taxes affect taxpayers differently according to their income and other socio-economic characteristics. They alter behaviour and influence the distribution of income both directly and through the public expenditure they finance. Taxation is, thus, not merely a device for transferring money to the treasury. It changes economic opportunities and affects the relationship between citizen and state. The celebrated Mirrlees Review sought to design a coherent tax system in which similar activities were treated consistently, and economic choices were not distorted without good reason. This is a valuable objective. Neutrality can reduce arbitrary discrimination and prevent tax considerations from dominating productive decisions. Nevertheless, even the most carefully designed system must decide which activities are alike, which differences justify special treatment and how equity should be balanced against efficiency. Those choices necessarily embody judgments about society. The idea of neutrality becomes more problematic when it is transferred from theory to a state characterised by unequal political influence. Consider a general sales tax (GST). In theory, a broad-based value added tax (VAT) imposed at a uniform rate minimises distortions and preserves the chain of documentation. In practice, exemptions, reduced rates, special schedules, fixed taxes, withholding taxes (unique in Pakistan even for VAT/GST!) and sector-specific arrangements are introduced during the political process. The final statute may bear little resemblance to the neutral instrument initially proposed. The same is true of income tax. Horizontal equity requires persons with similar ability to pay to bear comparable burdens. Vertical equity requires those possessing greater capacity to contribute more. In Pakistan, however, the legal character assigned to income often determines the burden more decisively than the taxpayer’s actual economic capacity. Salary, business income, capital gains, dividends, property income and agricultural income may all be subjected to different regimes, rates or jurisdictions. These distinctions are not always indefensible. Different types of income may require different collection methods. The constitutional distribution of taxing powers must also be respected. However, a CPE analysis asks why particular differences survive, who benefits from them and whether their stated rationale corresponds to their actual effect. Tax exemptions provide the clearest illustration. Governments describe them as instruments for attracting investment, supporting industries, protecting vulnerable groups or promoting exports. Some concessions may serve legitimate public purposes. Others constitute expenditure conducted through the tax system without the scrutiny ordinarily applied to direct spending. Pakistan’s official Tax Expenditure Report 2026 estimated revenue forgone during fiscal year 2024–25 through income tax, sales tax and customs concessions at approximately Rs. 2.353 trillion (excluding sales tax on POL products to deprive provinces of their constitutional right, replacing it with petroleum levy). Of this amount, sales tax concessions accounted for about Rs. 1.274 trillion, income tax concessions for Rs. 579.70 billion and customs concessions for Rs. 499.14 billion. These are not accounting curiosities. They represent choices about which persons, sectors and transactions receive preferential treatment, and which taxpayers must bear the resulting revenue burden. A concession granted through the tax law is economically similar to public expenditure. If the state collects Rs. 100 from a citizen and transfers it to an industry, the transaction appears in the budget. If the state allows that industry to retain Rs. 100 that would otherwise have been payable, the distributive effect may be comparable, but the benefit is less visible. This opacity is politically useful. Direct subsidies attract public attention and legislative scrutiny. Tax concessions are buried in schedules, exemptions and statutory notifications. Their beneficiaries are often concentrated and organised, while the cost is dispersed across millions of taxpayers and consumers. Constitutional Political Economy explains why such arrangements persist. A concentrated group has a strong incentive to lobby for a benefit worth billions of rupees. Each member of the general public, bearing only a fraction of the cost, has little incentive or capacity to oppose it. What appears to be an anomaly in tax design may be the predictable result of unequal political organisation. Withholding taxation presents another example. It is defended as an efficient method of collecting revenue from an economy with weak compliance. In limited circumstances, deduction/collection at source is entirely justified. Salary taxation (pay roll taxes) and payments to non-residents commonly require withholding systems in many jurisdictions. Pakistan, however, has transformed withholding from a collection technique into a parallel tax regime. According to the Revenue Division Year Book 2024–25, withholding taxes contributed 60 percent of total income tax collection in that year. Collection through withholding reached approximately Rs. 3.382 trillion. This reliance changes the institutional character of income taxation. The tax administration increasingly obtains revenue from transactions rather than determining taxpayers’ actual net income and ability to pay. Banks, employers, utilities, property registrars, businesses and other intermediaries become unpaid tax collectors. Persons already operating within the documented economy bear recurring deductions/collections in advance, compliance costs and the burden of seeking adjustments or refunds (hardly allowed automatically in