TAX evasion is adding insult to injury when it comes to the country’s economic crisis. Merely 2.5 million or 35 per cent of the 72pc total registered taxpayers have filed their returns for tax year 2021. This is a very low rate of compliance with the tax laws.

Ironically, instead of pressing harder for direct taxes, the government is choosing the easier path of expanding and increasing indirect levies, which spare the wealthy and directly burden the ordinary folks. This is because of its reluctance to reform the system for widening the tax-base, especially in the income tax regime.

Pakistan’s tax-to-GDP ratio, around 10pc, is one of lowest in the region and, indeed, in the world. It is at the heart of the country’s chronic economic and financial woes. Like its predecessors, the government has focussed on indirect taxation without addressing the difficult challenge of expanding the tax-base.

This strategy did not work in the past and will not deliver today or in the future. Hence, the government should focus on widening the proportion of direct taxation for which it should introduce due reforms.

Nazia Abro
Karachi

Published in Dawn, November 18th, 2021