TWO major components that determine a stable economy are revenue and expenditure. Revenue plays a major role in the economic growth of any county. Since coming to power, the government’s major motive has been to enhance revenue and improve tax collection throughout the country.

According to a recent report, Pakistan tax revenue was reported to be $6.730 billion in September 2020 with a decrease from the previous record of $29.091 billion in June 2020. Although the government’s top priority seems to somehow improve tax collection and to expand the tax base, the tax-to-GDP ratio on the basis of tax revenue is the lowest among all emerging countries.

Considering facts and figures, it is clear that tax collection in Pakistan has been a problem since its inception. There are multiple problems in the collection of tax.

To begin with, the undocumented economy is a major problem in the collection of tax. It is reported that only one million of the total population is taxpayer and most of the population is exempt from paying direct or income taxes.

No matter how strong the tax-collection system is, unless the economy of the country is registered and filed, streamlined tax collection is impossible. If we analyse the reasons for such a dilemma, we see that a majority of the population is not aware of tax laws. Even if people are willing to register themselves, they face several hardships, such as high fees of advocates.

The uncooperative businessmen represent a major problem in this regard. As far as the role of the government is concerned, it makes a framework and the policies for the payment of tax for the businesses. However, it is businessmen and traders who are under the obligation to pay taxes. Sadly, the business community and traders always resist any tax-collection move by the government.

In order to put pressure on a government, the traders take to the streets against any tax-collection measure or policy and shut their businesses, calling strikes and indulging in civil disobedience. Resultantly, the government goes on the back foot, and tax collection is affected.

Political instability has been another key impediment to the collection of tax. We always see every government facing non-cooperation and a campaign against the government by the opposition parties.

The business elite appear to be aligned with opposition parties in bringing a government down. In this regressive situation, every government ends up compromising with the business class. Resultantly, political stability is hard to achieve.

The tax-collection issue can be resolved if the government ensures transparency in tax collection, helps businesses to grow, launches business-friendly packages, spreads knowledge about tax, and introduces tax reforms.

Zubair Ahmed
Daharki

Published in Dawn, January 19th, 2021