The taxation crisis is one Pakistan is well versed with, as it faces one of the lowest tax return ratios in the world. It is estimated that around 7 million of the Pakistani population is eligible to pay income tax but only less than 5 million fulfil that responsibility which is reflected in the fact that a great chunk of the income tax is collected from businesses. The government earns 55 percent of tax revenue via indirect taxes such as sales tax. This is a problem the country has been facing since its inception. Only 0.3 percent of the total population pays direct taxes which results in Pakistan having the lowest GDP in the region and due to that fact, the government uses debt financing for development and infrastructure projects. Consequently, most of the tax revenue is then washed away in paying debts with high interests. 

The government should make efforts to promote a tax culture in Pakistan. The FBR (Federal Board of Revenue) should be made an autonomous organisation which would be free from politics. A strict accountability mechanism should be enacted for the FBR to check the corrupt practices of its officials. More tax rates should be levied and everyone should be taxed according to their capacity and ability to pay tax. More importantly, public trust in taxation system in Pakistan needs to increase and the government should look to establish that. 


Karachi, November 6.