Broadening tax net and bringing in it more tax payers has been a gigantic task for every government with thousands of those eligible for paying tax shying away resulting in revenue shortfall.
As the government has to meet expenses for running state affairs, it is compelled to borrow money from indigenous and international financial institutions that exert extra burden on national kitty and result in hike of utilities prices. As the present government carried forward the legacy of previous regimes, it is also facing serious financial issues in terms of debt repayment, tax collection and delivering social services to masses.
Therefore, in a bid to revitalize Pakistan’s economy, the government has unveiled a sweeping overhaul of tax system, aiming to harness a long-untapped revenue potential and broaden tax base, a move that can mark a significant departure from the country’s history of limited tax compliance.
The Federal Board of Revenue (FBR) has already been vigorously working to digitize tax system, curtail human intervention and plug leakages to improve overall tax collection mechanism.
The government is seriously following the agenda of economic progress which could be realized from the statement of Prime Minister, Shehbaz Sharif who termed the digitization of taxation system as priority to prevent tax evasion. Federal Minister for Finance and Revenue, Muhammad Aurangzeb, also in a recent interview, expressed confidence in FBR’s capabilities to play a pivotal role in achieving government’s fiscal objectives.
Lauding the outstanding performance of FBR for collecting Rs 9,311 billion during fiscal year 2023-24, the finance minister expressed confidence that FBR would achieve its revenue targets for current fiscal year, aiming to increase tax-to-GDP ratio from 9.5% to 13% over next three years.
According to FBR, as many as 4,900,000 people, eligible to pay taxes, have been identified with the use of latest technology while 42,000 retailers have registered themselves with the Board under its Tajir Dost Scheme to file their returns from July 1st 2024.
The board has also introduced monthly tax for small shopkeepers and retailers in 42 cities and issued a fixed monthly tax payments (ranging between Rs. 100 and above Rs. 20,000) for small shopkeepers and retailers registered in 42 big and small cities.
Based on the location of the shops, the FBR has issued market/area-wise- Indicative Income, Indicative Income Tax and Monthly Advance Tax to be paid by small traders. According to the Board, there has been a considerable structural improvement, with a focus on domestic resource mobilization, direct taxation from the rich and affluent and prompt issuance of refunds.
The business community has also expressed hope that the government initiatives would help broaden the tax base instead of putting extra burden on existing taxpayers.
President Islamabad Chamber of Commerce and Industry (ICCI), Ahsan Zafar has emphasized on bringing new individuals into tax net to ensure a broader and more inclusive tax collection system.
“Businessmen are willing to contribute taxes for the betterment of livelihood. However, it is necessary to bring about changes in the system and introduce reforms to make taxation process more effective and equitable,” he remarked. As Minister of State for Finance and Revenue Ali Pervez Malik also highlighted the commitment of the government for FBR reconstruction and digitization for increasing tax base, leading businessmen have underscored the need for making the tax return filing procedure simpler.
“Reforming Pakistan’s tax system to make it simpler, more efficient and taxpayer-friendly would have numerous benefits including increased tax compliance, a broadened tax base, improved revenue collection, ultimately leading to economic growth and stability,” remarked Former President SAARC Chamber of Commerce and Industry, Iftikhar Malik.
For improving overall tax system, he recommended simplifying tax laws for better understanding, ensuring transparency and accountability in tax administration, clear and consistent enforcement of tax laws and establishing robust support services for taxpayers.
In view of shortfall in tax collection and tax evasion by different segments of society, the government would have to diligently pursue its agenda of expanding tax base and tax collection conveniently in consultation with all stakeholders.
The reforms already announced by the government would hopefully lead to a significant improvement in the tax system resulting in increased tax compliance, a broadened tax base and improved revenue collection and help achieve economic stability.