The Need for Tax Simplification

By Basit Ali Khattak

Taxation is a very important tool that is used to meet the expenditures of a country. The tax system in Pakistan is very complex and it operates in a hybrid system i.e. FBR (Federal Board of Revenue) collects taxes on goods while provinces are responsible for providing services for tax collection. If we look at the tax system and its contribution, the figures show that only 10% of tax revenue collected contributes to the GDP (Gross Domestic Product).

There are two views that prevail regarding the taxation system. On one side the FBR officials claim that their taxation system is very efficient, while on other side the business community terms it as being very difficult. Every government, when it comes into power, claims that they will correct the system but the end result is always the same.

There are many issues with the taxation system in Pakistan such as failures in raising the tax percentage of GDP, the kind of taxation system (duality) implemented, taxation practices to be used and administration failing to collect taxes. These issues have to be solved immediately if Pakistan ever wants to increase its tax net and generate more tax revenue for public expenditure.

Now coming towards the general scenario. According to recent figures, Pakistan is a country of 220 million people, out of which less than one million people are paying tax. The basic reason for the low number of tax payers is due to the complex taxation payment system.

The average Pakistani is not very literate and for them to go through an overly complicated taxation filing procedure to register themselves as taxpayers is impossible. Therefore, a system where people are afraid of paying tax because of multiple reasons attributed to the system, can never be successful and may never bring increases in the tax net.

The business community goes through the same thing. The rules laid out for the businesses vary between different corporations and there is no mention of a progressive, proportional or even regressive tax system.

Considering the points mentioned above, there is only one solution. The simplest way to make sure that the system provides an adequate tax revenue is by making tax collection simpler. The government can focus on making the tax filing procedure extremely simple and can remove the intermediaries between the tax payers and the FBR.

Another solution can be that the government can launch an online system of paying tax either in the form of the online application or making different branches throughout the country in order to increase the percentage of GDP. Or FBR makes a link with all the commercial banks in order to make the taxation easier and comfortable to the common people.

In hindsight, just by making the tax system more accommodating and easier, Pakistan can see a massive increase in tax collection. When this happens, the fiscal condition of the country will be improved, there will be greater expenditure on public goods such as hospitals and parks, and many problems related to price-spikes will automatically improve.

Additional content has been added by the editorial team at The Weekly Pakistan.

The opinions in this article are of the writer and do not represent the views of The Weekly Pakistan.

The writer is an economics graduate, a freelance contributor and a researcher at Comsats University Islamabad. He can be reached at

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