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How to improve tax-to-GDP ratio

December 22, 2012

A STUDY study, prepared by the Centre for Investigative Reporting of Pakistan, showed that two-thirds of lawmakers sitting in our present assemblies did not file income returns for the financial year ended on July 30 last year. Quite a sizable number of parliamentarians reportedly do not even have a national tax number.

A country where legislators themselves appear to be violating the income-tax law, one should not be surprised to note that it has tax-to-GDP ratio of just 9.5 per cent, which is the lowest in South Asia. Perhaps the story does not end here.

It is generally perceived that big businessmen also do not pay their due share of income tax to the exchequer.

A country where legislators and big businessmen do not pay their due share of tax to the government, it is very likely that this tendency will trickle down giving society a tax-avoiding culture, which is very alarming sign for us as a nation .

However, I would like to point out that it is not a rocket science as to how to improve the tax-to-GDP ratio. The simple solution is that our political and business leaders should first set examples by paying their due share of tax to the government. The rest of the puzzle will be solved automatically.