Unfortunately no serious effort has yet been made in Pakistan to devise a rational tax policy for encouraging industralisation and corporatisation of businesses — leading to economic growth and documentation of economy. The sole stress on meeting revenue targets has created a situation of perpetual fiscal and social crisis. The failure to crack down on untaxed assets and ill-gotten wealth and ruthless wastage of public money has pushed Pakistan into a ‘debt prison’. We can get out of it by reforming the tax system. This alone can transform Pakistan into a true social democracy. Recent years have experienced closure of large industries and stagnation in growth. Alongside corruption, inefficiency and incompetence in the Federal Board of Revenue (FBR), inconsistent tax policies are dissuading investors from taking benefit of tremendous Pakistani talent. Pakistan is fortunate to have an abundance of resources but thanks to our inept economic managers and their submission to donors’ agenda, we have an overemphasis on retrogressive taxation. In such a situation, the country’s dependence on imported products has increased manifold, whereas value-added exports have not been given any attention, let alone promoting high-tech industries capable of technological innovations. Modern economies are knowledge-based and future is for those who can develop such an economy as quickly as possible. Though not a sole determinant, tax policy is still important to attracting higher levels of investment. Unfortunately, our budget makers have always been preoccupied with meeting revenue targets and have never bothered to provide long-term investment-oriented and export-driven tax incentives, without which sustainable inclusive growth is not possible. Pakistan faces the herculean task of providing jobs to millions of young people every year. For achieving these targets, the economy must grow at the 8-10 percent per annum over a long period of time — for this we need to maintain investment levels at 25 percent of the GDP. This challenge is also a great opportunity for economic progress. Majority of job seekers are young people — imparting education and skills to them and creating matching jobs is the real challenge. This can be met successfully by assignment of taxes for productive investment and employment generation. The prevalent pessimism is due to the attitude of the rulers and financial managers, who cannot think beyond what they are “commanded” or “trained” to think. They keep on telling us about the symptoms of an ailing economy but never try to cure the real causes of the illness. We need to incentivise corporatisation of business. At present, there are only about 68,000 companies registered with the Securities and Exchange Commission of Pakistan (SECP). Of these, 24,000 are active and file tax returns. There are numerous anti-corporate provisions in tax codes. The companies are maltreated by the FBR — after they pay billions in tax revenue they are still penalised for small lapses, that are neither intentional not willful. Taxation of notional benefits e.g. concessional loans in the hands of employees, high corporate tax rate, and double taxation of dividends and reserves out of already taxed profits are some examples of anti-corporate provisions — the list is not exhaustive. In these circumstances, no one would like to conduct business through a company, especially when audited accounts by independent and credible auditors are rejected by taxation officers just on whims. Litigation is imposed on the companies and they have to hire costly professional to get justice. The corporate sector is the worst affected by the FBR’s policies and widespread corruption — top management of FBR has a myopic outlook evident from its over-emphasis on withholding taxes. We could have promoted corporate growth by keeping corporate tax rate at a low level of around 20 percent. In 2015, the FBR imposed ‘tax on undistributed reserves’ (Section 5A of the Income Tax Ordinance of 2001) ignoring that reserves are created from already taxed income. Minimum taxation on service sector companies was another wrong move. In 2014, the FBR imposed an ‘alternative corporate tax’ (Section 113C of the Income Tax Ordinance of 2001). Such erratic taxation would further retard corporate sector and discourage future growth. Devising an efficient tax model for rapid economic growth in Pakistan requires an analytical study of all irritants prevailing in tax codes, procedures and implementation processes. Some of these irritants are highhandedness, corruption and high levels of maladministration in tax apparatuses — both at federal and provincial levels. We need a public debate on ways to remedy this situation and promote taxation and business growth, attracting investment and generating jobs. The writer is Advocate Supreme Court and Adjunct Faculty at Lahore University of Management Sciences (LUMS). Email: ikram@huzaimaikram.com; Twitter: @drikramulhaq