Key Takeaways
- →Pakistan’s Taxation Problem Pakistan has a narrow tax base , with only 3.5 million active taxpayers in a population of 240 million . The tax-to-GDP ratio has stagnated at 9-10% ,…
- →• Tax Evasion: The informal economy accounts for 35% of GDP , evading taxation.
- →• Over-Reliance on Indirect Taxes: 65% of total tax revenue comes from GST, customs duties, and excise taxes , burdening the poor.
Overview
Pakistan’s Taxation Problem Pakistan has a narrow tax base , with only 3.5 million active taxpayers in a population of 240 million . The tax-to-GDP ratio has stagnated at 9-10% , significantly below the regional average of 15-18% .
Key Challenges
• Tax Evasion: The informal economy accounts for 35% of GDP , evading taxation.
• Over-Reliance on Indirect Taxes: 65% of total tax revenue comes from GST, customs duties, and excise taxes , burdening the poor.
• Low Agricultural and Real Estate Taxation: Agriculture contributes 19% of GDP but only 0.1% of total taxes .
Reform Agenda
• Expanding the Tax Base: Mandatory CNIC-based invoicing can document the undocumented economy.
• Simplifying Tax Filing: A one-window digital tax system can improve compliance.
• Shifting Towards Direct Taxation: Gradually reducing sales tax and increasing income tax will create a fairer system.
Without meaningful reforms, Pakistan will continue to struggle with chronic revenue shortfalls and fiscal crises.
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