Consider this example:
Andy and Becky are both chocolate lovers. Andy has ten chocolates, and Becky has zero. Is the system Pareto efficient? (Hint: try taking one away from Andy and give it to Becky). The system, at this current state, is Pareto efficient. But not equitable.
Equity means the distribution of goods and services is reasonable to the parties involved. The chocolate lover Becky getting no chocolate is unlikely a reflection of an equitable society!
A market, at a competitive equilibrium, is supposed to be Pareto efficient. And this says nothing about justice. While driving efficiency is a market objective, managing equity is a political decision.
An instrument used by governments to manage this inequity is taxation. For example, in a progressive tax structure, the highest income earner will pay more proportion of their wealth compared to a lower income earner. The expectation is that the distribution of after-tax wealth is fairer than before. But you may argue that taxing is Pareto inefficient as it hurts citizens, more so the people with more wealth.
