Taxes are termed one of the most important source of revenue for the government and its related machineries. These taxes should be more focused on direct taxes, where tax payers liable and coming in the income group where taxes are applicable. Looking at these basics and bringing it to the Pakistani perspective, numbers do show that Pakistani authorities and revenue collecting frameworks are more inclined towards withholding taxes (WHT).Studies revealed that there are 68 provisions of WHT, which is one of the highest in South Asia, and partners with which Pakistan is engaged in trade and investment activities. In Pakistan, withholding taxes are collected in two forms: Withholding Income Tax; and withholding Sales Tax. Within these two collecting modes, Withholding Income Tax amounts to 87-90 percent of the revenue collected from direct taxes, whereas With holding Sales Tax is about 85 percent of the total revenue of sales tax. Components which come under direct the direct tax portion of WHT include tax on contracts, which is contributing 30 percent; followed by imports with 22 percent; banking transactions with 18 percent; electricity 11 percent; and tax on dividends amounting to six percent. Similarly, taxes under indirect or sales tax part of WHT include tax on imports contributing 67 percent to the revenue; tax on electricity contributing 10 percent; and tax on local suppliers contributing seven percent. When one looks at these rates, one finds they are arbitrarily set with no scientific evidence beyond them. Therefore, one cannot assess during the budget making process how much the business climate or individual person will be hurt by such taxes.It can be concluded that with the increase in WHT, there will be a decline in disposable income, with the lowest income group being most severely hitBuilding on this argument and when one looks at the South Asian countries, Pakistan is collecting WHT on a higher number of items when one looks at major revenue spinners such as imports; salaries; dividends; bank interests; contracts; exports (Pakistan being only country in this region to collect Withholding tax on exports); cash withdrawals; electricity; and telephone. Bangladesh follows Pakistan with taxes on dividends; interest; royalties; technical service fees; and branch remittance fees. India and Sri Lanka follow Bangladesh with only four items. For example, India does collection on interests; royalties; technical services; and any other services for which individuals are liable to pay 30 percent of the income whereas companies are liable to pay 40 percent of the net income. Sri Lanka collects dividends; interests; rent and service fees along with contract payments.Therefore, based on this argument of high number of withholding taxes and with major contribution going from Indirect taxes there are income groups which are being hurt most. Lower income groups such as those having informal contracts earning below the minimum wage of Rs 15,000 per month; earning maximum PKR 15,000 per month; and those earning minimum standard living wages are the ones who are getting affected by such taxes. Out of 68 provisions, while looking at electricity, contracts, communication and pre-paid cards these four provisions only cost a person earning below minimum wage about Rs 2000 per year more over the period inclusive price adjustments and tax rates. Similarly, these taxes a person who is earning equates to minimum wage per month is paying 2800 rupees more over the period for these four taxes and a person who is earning monthly minimum living wage to meet standards of living is paying Rs 5,000 more over the period in one year.Therefore, with the changes in disposable income taking place over the year, there is probability of change in poverty headcount. Those earning a maximum of Rs 10,000 per month are going towards poverty by 0.58 percent; those earning maximum 15,000 rupees per month are going towards poverty by 0.61 percent; and those who are earning minimum living wage to meet basic standards are going towards poverty by 0.49 percent. So, it can be concluded that with the increase in WHT and addition of more taxes to these numbers, there will be a decline in disposable income, with the lowest income group being most severely hit. Similarly, the lowest income groups, particularly those below the minimum wage and inclined more towards poverty line have higher probability of being poorer. This results in low disposable incomes and leads to low access to basic needs by affecting costs and standard of livings.Thus to control the welfare losses and prevent people from going towards poverty, first the new government should gradually phase out withholding taxes after an updated tax gap and tax incidence study. Second, to broaden the tax base revenue, authorities should be allowed to use Information technology tools, including use of biometric information available with National Database and Registration Authority (NADRA). Furthermore, to broaden the tax base all data warehouses should be integrated with access provided to all the revenue authorities. Third, people’s participation should be ensured with an oversight in revenue collection and audit through strengthening accountability and transparency mechanisms. Pakistan can work in this regard with Open Government Partnership to ensure initiatives such as Open budget as practiced in different countries such as the Commonwealth. To conclude, the new government should focus on updating all of the studies and numbers with gradual phasing out of WHT along with broadening of the tax base, and open budgetary initiatives. These initiatives will therefore bring in welfare gains for people facing challenges in achieving basic standards of living.The writer is associated with Sustainable Development Policy InstitutePublished in Daily Times, September 11th 2018.