Why filing taxes actually helps your wealth grow

Why tax filing matters more than you think

Muzamil opens the video by announcing a long-promised update on a topic he’s wanted to explain for months: tax strategy in Pakistan. The typical freelancer or small business owner in Pakistan thinks tax filing is optional, something to avoid indefinitely. Muzamil flips this premise. He argues that tax filing is not optional. It is coming whether you plan for it or not.

“This video is not for those people,” Muzamil says, referring to those in agricultural or merchant-only businesses that have no formal structure. He is targeting the growing class of knowledge workers, freelancers, and small business owners in cities like Karachi, Lahore, and Islamabad. For these people, he says, entering the tax system is not about paying more. It is about paying smarter.

The real cost of staying outside

Muzamil frames the core tension this way. Many Pakistanis believe staying outside the formal system protects their wealth. It does not. Staying outside the system keeps you small because you cannot think big while defending every rupee from imagined government pursuit.

He recalls a podcast with Bakhtiar Baksh, a founder of a major company, to illustrate this point. The founder built a company worth hundreds of billions of rupees. Muzamil asked him why he entered the tax system so early and whether he regretted it. The founder said no. He said, “I didn’t sit crying over every penny. I want to dream big.”

“When you sit and think about every penny,” Muzamil says, “then they can’t think big.” This is the real tax on staying outside the system. It is not financial. It is psychological. You trade potential upside for marginal tax savings, and the math does not work.

How salary earners can optimize

For the salary class in Pakistan, Muzamil outlines concrete steps that require no illegal action. First, health expenses. If your employer does not offer health insurance, you can deduct health expenses from your taxable income if you keep receipts. Doctors, medicines, hospital bills. All of it goes on paper, gets submitted to your accounts department, and reduces your taxable income.

Second, charitable donations. Pakistan values charity highly, but random cash donations do not reduce your taxes. Only donations to registered institutions do. Muzamil says, “Go, think big, do something big. Bring some growth mindset.” When you donate to a structured charity, request a tax certificate. Your accounts department will adjust your deductions accordingly.

Third, mutual funds and pension funds. Money placed in these instruments qualifies for tax breaks. The fund is managed by professionals, the risk is lower than direct stock picking, and the tax benefit is real. Muzamil encourages ordinary earners to “start investing some of your money” in these vehicles because the compound effect over decades is substantial.

The withholding tax you’re not reclaiming

Muzamil points out a major leak in most people’s finances. Every time you pay a phone bill, use a credit card internationally, or send money abroad, you pay withholding tax. Netflix subscriptions, Google Play, cross-border transfers: all of these carry a 5 to 10 percent tax that is deducted at the point of transaction.

If you are not filing taxes, you are losing this money. If you file, you submit the certificates and reclaim it. “Literally, take it to your accounts department,” Muzamil says. “You can go and this is your accounts department.” The certificates prove you paid tax on these transactions. Your accounts department adjusts your net income downward, and the government reimburses the difference.

Most Pakistani workers are paying withholding tax three or four times over through multiple channels and reclaiming none of it because they do not file.

The dollar income trap

Toward the end of the video, Muzamil addresses the core question in his title: should you bring dollars directly to your bank account? The short answer is no, not without structure.

He explains that for ordinary freelancers earning dollars abroad, transferring money directly to a personal bank account raises flags immediately. The government sees a large inflow and assumes it is income, applies the full tax bracket, and presents a bill. The freelancer thinks he is being targeted unfairly because he does not understand that the system sees the deposit as declared income whether he intended it that way or not.

The solution is structure. If you are earning dollars consistently, formalize it. Register as a business. Set up a company or freelance entity. Use proper invoicing and banking channels designed for foreign income. This is not more expensive. It is cheaper than the alternative: paying tax on the full amount with no deductions allowed because there is no structure to prove expenses.

The long view: system beats chaos

Muzamil closes by emphasizing that the choice is not between “paying tax” and “staying free.” It is between structured and unstructured. Structured costs you less in the long run, allows you to claim expenses, and most importantly, allows you to think and build big. Chaos costs you more in taxes, in legal risk, and in the opportunity cost of being forced to think small to avoid notice.

“As long as you keep avoiding this tax filing, a backward economy will be,” he says, extending the argument beyond personal finance into economics. The system works when people are in it optimizing and growing. It breaks when people stay outside and think small.

For Pakistani freelancers earning dollars, the message is clear: do not bring it to your bank without a plan. For salaried workers, optimize through what the system allows: health, charity, investments. And for all of them, Muzamil says, enter the system not to punish yourself but to set yourself free to build something big.