Problems of Pakistan’s Tax system

Governments’ only source of income generation is tax. The generated revenue is then allocated for the expenditures of federal and provincial governments. The major issue or challenge that our society is facing is unequal collection of taxes. People have been highlighting and protesting since so long on unfair tax system. It has always been a hardcore problem for Pakistan’s economy to generate revenue; this is the reason for which our government has looked for Structural Adjustment programme at first. But, the problem still lies with the tax system. Now, this is the government’s core responsibility to identify that issue and take fundamental steps for the solution of those issues.

Government needs to reform the policies specially in the area of giving large number of exemptions in sales tax, income tax, excise duty, and custom duties due to which the incidents of tax evasions takes place. Meanwhile, if we talk about a repeated and frequent change that takes place in the legislation of taxation system that leads to its distortion. I would like to mention here one thing that all the changes that takes place in the taxation system are done just to give exemption to certain elite groups and corporations. Here, one basic question comes in mind that where just, fair and transparent system?

Some highlighted issues; I try to point out here some of serious concerns on narrow tax base and tax evasion. Talking on these challenging issues some questions raise are: why people use to evade taxes? Why corporations and some elite groups are exempted from taxes? Why rich don’t pay their due amount of share? Why only poor are burdened with general sales taxes?

According to the statistics, only 1.21 million citizens pay income tax making it less than 1% of the total population. But according to state bank of Pakistan’s annual report, 57.5 million people are employed and obviously are earning some income and thus 57.5 million people should be paying income tax one way or the other. So, that rules out the figure of tax payers that keeps on floating here and there. Moreover, Pakistan’s total population is around 207 million. According to the common notion, 29% of the population is paying the taxes. But, according to economic survey of Pakistan 61.4% population is of working age making 122 million people fall into the working population. Besides, 57.5 million tax payers constitute of 48% these working people.

Approximately 140 million mobile users pay more than 20% taxes on their consumption. People use automobiles which use fossil fuels that are subject to different taxes and consequently people end up paying them. These are the most certain taxes that probably no one can evade. Now here, what I wanted to highlight is that all the users are paying equal taxes, do you not think that it should be charged on the basis of the income of a user?

The problem lies with the poor management of our existing resources. What if, our government went for progressive tax system instead of regressive one? Progressive tax system is defined as when you impose higher taxes for the people with higher income whereas, lower taxes are going to be imposed for the lower level of people.

To sum, I would like to say that people will surely don’t evade taxes if they don’t find the absence of trust. Whereas, the state should move towards the progressive tax system so that the one who is rich won’t get richer and the one who is poor won’t get poorer. As, people will then find justice to them.  We find the lack of transparency and accountability within the system as well, that make people question that whether the money we’re paying in terms of taxes is being utilized for our own benefits or it being used for satisfying the interests of someone else. Therefore, it is to be recommended that the government should make reform in the tax system, there is a badly need of using modern technology to analyze data, ensure the level of trust, accountability and transparency for achieving better tax system.





Prevailing tax issue and Constitutional Status of Gilgit-Baltistan

Gilgit-Baltistan (GB) previously known as Northern areas and locals call it Balawaristan, in British rule it was administratively controlled by State of Jammu and Kashmir. In 1947, after Pakistan and India gained independence from British rule, Jammu and Kashmir had the option to join either India or Pakistan or to remain independent. Jammu and Kashmir initially remained an independent state, Later on October 1947, tribal militias crossed the border into Jammu and Kashmir, as result Lord Mountbatten(first Governor-General of India), and Indian politicians pressurised/offered Maharaja to accede Muslim Majority State to India, after some resistance Maharaja signed an Instrument of Accession to the Dominion of India. People of GB in the supervision of Scout commander Col. Hassan Khan (from Nagar) mutinied on 1 November 1947, overthrowing Governor Ghansara Singh and formed the provisional government but it lasted 16 days. After that Government of Azad Kashmir made an agreement with Govt. of Pakistan. This agreement had many flaws:

  1. Govt. of Azad Kashmir has no relationships with GB because both are separate setups which were previously controlled under Jammu-Kashmir so authority might rest with Jammu-Kashmir, not Azad Kashmir.
  2. Govt. of Azad handed administration of the area to the federal government via the Karachi Agreement, without even consulted the people of GB (Modern name).
  3. According to Political Scientists, this was no an agreement because it deprived significant powers and responsibilities of Gbians/Kashmiris in return for nothing.
  4. The agreement was apparently kept as a secret document up to 1990s (Public upon orders by the court of Azad Kashmir).
  5. The Interim Constitution of Azad was silent about GB from 1949 till 1974. In 1972 Legislative assembly passed a resolution to reclaiming Gilgit-Baltistan.

After dissolving the status of the Interim state, people of Gilgit-Baltistan living under constitutional limbo, they are being subject presidential orders from Federal and as a result no permanency in rules of the business.

Due to provisional setup GB facing problems in divisional indigenous financial planning with no clear means of revenue and expenditure. Bureaucracies also don’t have clear solution regarding GB due to overloaded bureaucrats especially from federal with no preference to locals. Gilgit-Baltistan fiscal issues currently managed via GB Council, which is comprised of mostly non-local members chairing by PM of Pakistan. Federal govt. passed the GB tax adaptation act in 2012 but implemented in Nov 2017 which fuelled the protest and shutter down strikes. Locals chanting the slogan of #NoTaxationWithoutRepresentation and saying that ‘’we are being taxed by a Parliament to which we have no representatives. We (GBians) are Aliens as per Constitution of #PAKISTAN”.  They are demanding the rights as a citizen of Pakistan to pay taxes. Recently Govt. decided to withdraw from imposing the direct taxes upon fierce reaction but indirect taxes already paid by residents of GB with no Tax rebate and share to the region.

Govt. of Pakistan is collecting far greater amount as revenue compared to Expenditure, in terms of customs duties from Pak-China trade via SOST Dry in Gilgit-Baltistan, Licencing of trophy hunting, leasing of Mineral reserves & amount earned from tourism, and this amount is directly collected by federal govt. with no share NFC awards. The royalty of rivers coming from GB has not been given till to date. As per the Shimla Agreement between Pakistan and India in 1972, disputed territories including Jammu, Azad Kashmir and GB have been provided subsidy on almost 70 items, but this is also gradually cut by Federal.

Before the start of new economic Era of CPEC(China Pakistan Economic Corridor), Gilgit-Baltistan (the gateway of the route) needs to be given clear and sustainable governance structure with the consent of locals, so that they will be able to legislate based on local scenarios in many aspects including fiscal policy at the forefront. Otherwise big corporates will establish tax havens and will evade the taxes. In addition to this, there is also need of drastic changes in order to solve the long-lasting issues as well as counter the arguments and propaganda of INDIA on international forums.


Tax disparity & tax injustice repel nation to miseries

Greatly astonishing to know that the poor people and commonly deprived and underprivileged people of Pakistan were being burgled in the name of the tax by the regressive tax system of Pakistan.

The mostly hard-poor population of Pakistan is bearing expensive and exclusive expenses for the enjoyment of the luxurious lives of the rulers and elected members.

Heart bleeds, that once, who has nothing to pay for the fees of their kids for schooling, disappointed to provide two-time meals to his/her kids and even no clothes to put on at their half-naked bodies and we observed their kids shatter in the coldish weather.

Which the situation could be, but poor people are abiding to pay the tax to the government for its functioning and entertaining the high perks and privileges of the rulers and their facilitators.

“The solitary kid (son) of Annu died for the quest of a low-priced pill but on tax of Annu, yet his rulers were feeding their dollies (dogs) with high-cost feeds”

The pertaining situation was more pathetic and pitiable for all those poor individuals who could dare to defy the regressive tax system of Pakistan, he may don’t cost to bear the price of the “cloth, cover the corpse” but the government would not tolerate his negligence in paying the tax.

The rulers and their facilitators by using their lofty rights can get exemption and relief in connection of paying their tax of their palaces, business and others banks credits or huge assets but the poor couldn’t dare so. There is an aged concept made in the poorest society of Pakistan that “government operate its systems for the favors of the rulers and their successors but perishing the poor”

Could we talk on the policies for improving social justice and tax justice that usually mean for things such as the provision of the basic facilities like health facilities, free quality education, food security or other basic infrastructures and cash transfers to the poorest segments of the population? There is an old Latin saying goes, “It is better to suffer an injustice than to do an injustice.”

So the crumbling, inefficient and corrupt tax tackles are the root cause of the present pertaining pathetic situation of the country. Tax officials tirelessly squeeze and penalize poor taxpayers on the one hand but on the other, join hands with and protect big tax evaders

The poor people and small businessman, already heavily taxed through withholding tax mechanism, are victims of their highhandedness. It is high time that government must put its viable efforts in order to stop malicious propaganda against the people in general and poor and small business community in particular.

At present the entire poor population of Pakistan having below taxable incomes is paying income tax on the low resource or income, but government is yet the favoring the richest to save them from tax-paying and we must not forget that all these type policies which mainly target the poor can grow the cancer of inequality in the society and we should note that tax avoidance and evasion can hamper development efforts.

It is now a time to put an end to this injustice so justice can prevail and must change the regressive tax system in progressive taxation amid to provide basic facilities properly to the nation.


ٽيڪس جي ٽياس تي ٽنگيل غريب عوام ۽ طبقاتي نظام

اھا حقيقت آھي تہ امير ماڻھوء کي غريبي جي ڪھڙي خبر ته صبح جو اھو غريب جيڪو پنھنجا ٻچا لنگھڻا ڇڏي روزگار جي لاءِ شھر جي چوڪ تي وڃي مزدوري جي آسري تي ويھي ٿو رھي، پر جڏھن کيس ڪا به مزدوري ناھي ملندي تہ ھو مايوسي وارو منھن کڻي واپس موٽندو آھي ته ان وقت سندس احساس ڪھڙا ھوندا آھن، سندس سوچ ڪھڙي ھوندي آھي. اهو ته صرف انهن کي ئي خبر هوندي آهي. پر موجوده حڪومت تي صرف افسوس ئي ڪري سگهجي. ڇو ته اها حڪومت عوام جي ضرورتن ۽ انهن جي دردن کي نه ڄاڻي سگھي آھي. اسان جا موجوده ڪرپت حڪمران ۽ ڪامورا غريب عوام جي ٽيڪس جي پيسن مان عيش عشرت پيا ڪن ۽ هتان غريب عوام جو پئسو کڻي ٻاھرين ملڪن ۾ سيڙپڪاري پيا ڪندا آهن. اڄ جي ھن طرقي يافته دور ۾ غريب، غريب تر ٿيندو پيو وڃي ۽ امير، امير تر ٿيندو پيو وڃي. انھيءَ جو ھڪ وڏو سبب طبقاتي نظام آھي جنھن ۾ ھڪ عام ماڻھو ته ٽيڪس ادا ڪندو آھي پر اھو وڏيرو، حڪمران يا ڪارپوريٽ سيڪٽر جا والي وارث جي ڪرسي، دولت ۽ طاقت جي نشي ۾ ڌت غريب عام جي ٽيڪس جا ادا ڪيل پئسا چوري ڪري دنيا جي ملڪن ۾ وڃي سيڙپ ڪاري ڪري ٿو. عام ماڻھو ويچارو ته ماچيس جي تيلي کان وٺي ڪري، اٽو، لوڻ، ۽ ٻين عام ضروري شين تي ٽيڪس ادا ڪندو رهندو آھي. ٽيڪس ادا ڪرڻ ملڪ جي مجموعي ترقي لاءِ اهم آهي. اهو چيو ويندو آهي ته ٽيڪس ڀاڄي، ڳڀي، ڀت وانگر ضروري ھوندو آھي، استاد بخاري جي سٽن وانگر ته “مڃو ٿا سنڌ تنھنجي سينڌ کي رت جي ضرورت آ رت کي وري ڀاڄي، ڳڀي، ڀت جي ضرورت آ” اھو ڀاڄي، ڳڀو، ڀت ٽيڪس آھي جيئن انسان جي جياپي لاءِ کاڌو ضروري ھوندو آھي ائين ئي ٽيڪس به ملڪ جي اوسر ۾ اھم ڪردار ادا ڪري ٿو. اسان جي ملڪ ۾ ٽيڪسن کي گڏ ڪرڻ جو ھڪڙو نظام ٺھيل آھي، جنھن جون پاڙون پڻ عوام دشمن، غريب دشمن اڪثريت دشمني تي رکيل آھن. اسان وٽ ٽيڪس آمدني جي بنياد تي نه آهي پر ماڻھو جي شين خريدڻ ۽ انهن جي استعمال جي بنياد تي لاڳو ڪيو ويندو آهي. جنھن ڪري غريب کي ھر شيء جي خريداري تي ٽيڪس ڏيڻو پوي ٿو جڏھن ته شاھوڪار مختلف طريقن سان پنھنجو ٽيڪس بچائي وڃن ٿا. ٽيڪس جو سڄو نظام اڻ سڌين ٽيڪسن وصول ڪرڻ تي آھي جنھن کي ريگريسو ٽيڪس (اڻ سڌا ٽيڪس جيڪي صرف خريداري تي وڃن) جو نظام ڪوٺيو وڃي ٿو. جڏھن ته باقي دنيا اندر اھو پرگريسو نظام (جنھن ذريعي ماڻھن، ادارن جي سڌي منافعي ۽ ڪاروبار جي آمدني تي ٽيڪس ورتا وڃن، (جيڪو جيترو ڪمائي اوترو ٽيڪس ڏي) آھي جنھن ۾ ٽيڪس جو بار سمورن طبقن تي ھڪجھڙو نه پر سندن ڪمائي تي ورتو ويندو آھي. جيڪو انصاف تي ٻڌل نظام آھي، انھيء نظام کي رائج ڪري طبقاتي نظام ختم ڪيو وڃي ته جئين غريب عوام کي ٽيڪس جي چڪي ۾ وڌيڪ پيڙھجڻ کان بچايو وڃي..