Upping Tax Take In Pakistan Calls for “Out of the Box” Thinking

March 14, 2016 Taxation in Pakistan

KARACHI – Tax authorities in Pakistan hope to raise the tax-to-GDP ratio to 18 percent, though some experts think that their strong-arm tactics and poor treatment of taxpayers have placed the goal out of reach.

While speaking at a conference hosted by the Karachi Chamber of Commerce and Industry late last week, Haroon Akhter, the Advisor to the Prime Minister on Revenue of Pakistan, said that the tax-to-GDP ratio in the country needs to rise to 18 percent in order for the government to see a budget surplus.

Currently the tax-to-GDP ratio in Pakistan is estimated to be approximately 11 percent, which will rise to a further 12 percent over the course of this year.

Explaining the implications of even further rises, Haroon Akheter said “…if tax-to-GDP improves by 6 per cent, bringing it at par with India, we will have a surplus budget and hence the revenue earned will be utilised to build projects and ensure prosperity for the country.”

He added that in order to see further improvements in tax collections, the national tax authorities may have to implement “out of the box” solutions to encourage more individuals to begin reporting their taxes, instead of continuing to dodge the tax net.

Haroon Akhter went on to say that the national tax authority, the Federal Bureau of Revenue, has continually tried to “…encourage people to make legitimate money and give medals to loyal taxpayers who have been making invaluable contribution to the national economy.”

However, other speakers at the conference claimed that while the FBR attempts to pull more people into the tax net, it fails to address its own image, claiming that the tax authority’s harassment and mistreatment of honest taxpayers is part of the reason that many individuals continue to evade their tax obligations.

Photo By: Alan Cleaver