New Delhi: India’s successful precision strikes on multiple Pakistani terror camps under Operation Sindoor once again showed the latter’s continuous resolve to fight against cross-border terrorism. However, if matters escalate further, does Pakistani have enough economic resilience to wage war with India?

The precarious tax revenue situation in Pakistan is directly linked to its economic woes. And that in turn affects its state capabilities. In case of a long-drawn conflict with India, the financial odds are heavily loaded against Pakistan. The latter may literally run out of money before it runs out of bullets.

The fiscal year of Pakistan begins on July 1 and ends on June 30. A record PKR 391 billion in income tax was paid by the salaried class in the nine months from July 2024 to April 2025. The blue-eyed traders paid only 60 paisa in taxes during the July-March period while the salaried class paid 10 out of every 100 Pakistani rupees.

Several media reports have revealed that 10 percent of the total income tax collected in Pakistan is currently paid by salaried individuals, thus indicating a severely discriminatory tax system. 

According to Pakistan’s Federal Board of Revenue’s (FBR) preliminary collection estimates the income tax payments for the nine months of this fiscal (running from July 2024- April 25) year totalled Rs 391 billion which is Rs 23 billion more than the total amount of income tax paid by the salaried class during the 12-month period of the previous fiscal year. 

The middle and upper-middle income classes were greatly impacted in June 2024 when the government eliminated several tax brackets and drastically increased the tax burden on salaried individuals. Those who earn Rs 443,000 per month are now subject to the highest tax rate of 35 percent. A 10 percent surcharge has been added and that has brought the total tax rate to 38.5% for the highest slab.

IMF Vs Pakistan: Disagreement Over The New Income Tax Rates

A disagreement over the new income tax rates for salaried and non-salaried individuals caused Pakistan and the IMF to abandon their talks last year without reaching a consensus. 

To generate additional revenue for the government that is struggling financially, the International Monetary Fund (IMF) suggested last March that Pakistan implement several measures like raising taxes and lowering tax slabs, a media report stated.

The IMF has evaluated that the complete implementation of the Personal Income Tax guidelines might result in an additional revenue of 0.5 per cent of the GDP, equivalent to Pakistani Rs 500 billion annually, The News International reported.

India Vs Pakistan Economy: A Juxtaposition

India’s GDP in 2024 was estimated at $4.2 trillion and that of Pakistan was $374 billion. India’s per capita GDP was $2,711 in 2024 and that of Pakistan was $1,581.

While India is expected to overtake all other economies as the world’s third largest economy within the next ten years, the IMF has reduced Pakistan’s 2025 GDP growth estimate from 3 percent to 2.6 percent.

Pakistan is contemplating important adjustments in its tax policy for the fiscal year 2025-26 budget. The FBR plans to raise the yearly tax exemption threshold for salaried individuals from Rs 600,000 to possibly Rs 1,000,000 or Rs 1,200,000. 

Considering, a very small percentage of Pakistan’s citizens pay income tax, limiting government capacity for public investment and debt repayment, can the country afford to wage a full blown war with India? The scope seems extremely restricted serious doubt whether Pakistan can afford to go to war with India.