A good tax system is one that raises money with minimal distortion to the economy. In Pakistan, oppressive, unfair and complex tax system is the main cause of many distortions in economy. Budget 2020, expected on June 12, 2020, is to address the daunting challenge of mitigating economic toll of Covid-19 pandemic. In these circumstances, the government must reverse the negative role of taxation for ensuring survival/revival of businesses. It is imperative to lower marginal tax rates and broaden tax base with few, if any, tax exemptions. New tax system should not only be simple but must also keep the cost of compliance low-our prevalent structure falls far short of this ideal. Existing fragmented tax system is extremely complicated and cost of compliance is very high. The coalition government of Pakistan Tehreek-i-Insaf (PTI) in 2018 and 2019 failed to undo the distortions created by the last two governments. In 2020, in the forthcoming budget, the PTI government must not miss the opportunity of undertaking long-delayed fundamental structural reforms, lowering of tax rates and introducing simple compliance mechanism. Fiscal year (FY) 1998-1999, according to Annual Report 2018-19 of State Bank of Pakistan, registered “an unusual decline in revenue collection and steep rise in current expenditures…The overall budget deficit during the year stood at a historic high of 8.9 percent of GDP…Meanwhile, the primary and revenue balances worsened substantially, highlighting growing debt stress for the government and a shrinking space for the needed development expenditures”. The situation of the current FY 1999-2020 due to Covid-19 epidemic will be the worst in our history, with negative growth and fiscal deficit as high as 10.8% of GDP, according to estimates by many reputable research institutes and economists. The Federal Board of Revenue (FBR) is going to miss the revised target for the current fiscal year by a big margin-it collected only Rs. 3408.83 billion up to March 31, 2020. In FY 2018-19, it collected Rs. 3828.5 billion showing negative growth of 0.4%. The target of Rs. 4435 billion fixed originally in 2018-19 was revised first to Rs. 4398 billion, then to Rs. 4150 billion. This year collection may be even lower than last year due to Covid-19 pandemic. FBR never admits massive leakages in revenues due to its sheer inefficiency and incompetence. It never acknowledges the higher cost of compliance for citizens-90% collection comes through withholding or advance tax or tax paid with returns [see study of PIDE: Doing Taxes Better: Simplify, Open & Grow Economy]. It is high time that the government reduces the cost of doing business and eliminates all unnecessary withholding taxes [66 in income tax law alone and if we add those imposed under sales tax laws on goods and services by the federal and provincial governments, they make transactions too cumbersome to be executed]. There is need to bring radical reforms in Finance Bill 2020. The strategy of raising revenues through higher/multiple taxes and numerous withholding provisions has miserably failed. Successive governments, military and civilian alike, have never thought of using refundable tax credits as chief form of income support for the working poor-as is the case in many countries, notably in United States. When American politicians want to encourage home ownership, the purchase of health insurance or attendance at college, or merely to help a favoured industry, they reach for tax breaks as a tool to boost the economy. There is a need to learn from others. For example, the introduction of alternate minimum tax (AMT) revolutionised the entire American tax system. The economically-distressed should be given social security. More innovative measures will be presented in the coming article before the announcement of federal budget In January 1969, U.S Treasury Secretary informed Congress that 155 taxpayers with incomes exceeding $200,000 had paid no federal income tax in 1966. The news created outrage. That year, members of Congress received more constituent letters about the 155 taxpayers than about the Vietnam War. Congress subsequently enacted an “add-on” minimum tax that households paid in addition to regular income tax. It applied to certain income items (“preferences”) that were taxed lightly or not at all under the regular income tax. The largest preference item was the portion of capital gains excluded from the regular income tax. Congress enacted the modern alternative AMT in 1979 to operate in tandem with the add-on minimum tax. The AMT is a little-known back-up to the income tax which is designed to ensure that the rich Americans could not avoid paying income tax entirely by claiming too many deductions. It allows fewer deductions than the normal income tax (mortgage interest, donations to charity and a few other things). It is also less progressive, with two rates of 26% and 28%, levied on incomes above certain, tax-free amount, which in the case of a married couple has long been $ 45,000. Under present American law, U.S citizens (or resident non-US citizens) have to pay either income tax or AMT, whichever is higher. We must also introduce AMT to tax the rich Pakistanis, who at present are not paying income tax actually due after excessive deductions, reduced tax rates or exemptions. In the Pakistani scenario where tax base is highly distortional as elites enjoying numerous exemptions and big companies numerous deductions, AMT can be an effective tool for retrieval of due revenues. The AMT can be made more progressive retaining the most popular incentives of today’s income tax, without bringing in even more exemptions favouring the affluent classes. In 2004, Michael Graetz, a tax expert at Yale University, came up with an innovative way for simplifying American tax code. He suggested replacing income tax with AMT, but with an exemption of $100,000 per family and single rate of 25%. With US $ 100,000 exemption, only 25 million people were to pay income tax. To make up for the lost revenue, Graetz suggested introducing a value added tax between 10% and 15%. This could shift the tax base towards consumption rather their income, and would thus be friendlier to saving. Marginal rates would be low. And the system would be simpler. To retain progressivity and mitigate the impact on the poor, Mr. Graetz suggested that the poor Americans could get tax relief on their contribution to Social Security. We should consider this model for Pakistan after debate and changes suitable to us. In 2020, we must dismantle the existing rotten tax system. If Prime Minister Imran Khan is serious about collecting fair/just/adequate revenues, ensuring revival and growth, fundamental policy and administrative reforms are indispensible. He must ask his economic team for immediate withdrawal of all pro-rich exemptions in tax codes and bring the rich Pakistanis under AMT. The sales tax should be rationalised by reducing its rate to 8% with no exemptions. The end consumers should be given a facility to get refund of 2% on production of evidence of payment of sales tax and no question about sources of expenses. It would encourage documentation, as buyers will invariably insist for invoice on purchases. The economically-distressed should be given social security. More innovative measures will be presented in the coming article before the announcement of federal budget. The writer, Advocate Supreme Court, is Adjunct Faculty at Lahore University of Management Sciences (LUMS)