The taxation has always remained a problem area for the government due to some inherent flaws in tax laws and various other factors, including absence of tax culture and structural frailty of the implementation machinery. The tax-to-GDP ratio in Pakistan is purportedly the lowest not only in South Asia but also in the world. Keeping in view this factor, the government had planned to increase tax-to-GDP ratio to 15 percent in five years, but all the efforts have ended in smoke. The federal as well as the provincial governments and federal territories have failed to show any performance in the field of taxation, trade and economy. The government though has been able to enhance its revenues under different heads, but the number of taxpayers has decreased over the years and this should be the area of concern for the policymakers. The enhancement of tax ratios and increasing the list of goods and services to collect taxes is not a pride, but a problem in the long run. Increase in the numbers and ratios of taxes will ultimately affect the business community, which is already paying heavy taxes, and the common man, who has to pay more from his limited financial resources.
According to newspaper reports, the federal and the provincial finance ministers have jointly finalized a report to lay it before the both houses of parliament to monitor the implementation of the National Finance Commission award. It was made a constitutional requirement for the federal and provincial governments in 2009 to achieve 15 percent tax-to-GDP ratio by 2014-15. However, the ratio could increase only from 9.4 percent in 2012-13 to 9.5 percent in 2015-16. This is the situation of the tax collection in a country of over 200 million people. The international donor agencies have continuously been pressuring the government to enhance tax collection targets which are achieved to some extent. But the problem is in the method and not in collections.
It is important to note that unless structural reforms are introduced in the tax collection system, tax-to-GDP ratio will not increase. A mechanism is the need of hour to engage every business entity in tax collection process even if it is as small as a vendor. The tax filing system should also be as easy as is a telephone or gas bill. The government should also avoid amendments into the tax laws which bring complications instead of facilitation for the business community. In the nation of 200 million people, marginal tax ratio is a symbol of not only a poor economy, but also a poor management.
