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Tax reforms need of hour

Tax reforms need of hour

The tax-to-GDP ratio in Pakistan is the lowest in the region, but the Tax Reforms Commission, in its final report, claims that the tax regime in the country is in favour of the elite classes. The report, which is completed in one and a half years, suggests that all the top office holders in the country should be taxed to maintain equality in the taxpayers. It is long been demanded by the international donor agencies to introduce structural reforms in the tax collection system. The report highlight serious flaws in the tax structure as the poor have to pull more burden in the form of indirect taxes than the other classes. The commission proposes the setting up of a national tax agency to rationalize the tax regime as under the prevailing system the business class is also pressured by one tax or the other.

It is unfortunate that the common man has to pay tax on every step, but the president, governors,the provincial head of governments and ministers draw heavy perks from the national exchequer in addition to enjoying exemption on property tax. Though the federal government had withdrawn tax concessions worth Rs 208 billion in the previous two budgets, but they still enjoy concessions and benefits in the shape of income tax exemptions. It should be noted that commissions are often mandated to carry out investigations and give suggestions to avoid the repeat of the similar situations. However, once a commission reports its findings, the responsibility of devising a mechanism rests on the shoulders of the federal government. The Tax Reforms Commission has called for the establishment of a single national tax collection agency with a mandate to collect taxes on behalf of the centre and provinces. No method of tax collection would work until fundamental reforms are introduced in the administrative structure of the country.

The current tax collection system is complex whereas business organizations as well as individual taxpayers are burdened with more obligations than relief. The tax-to-GDP ratio is lower, but sincere taxpayers should not be pushed to the wall to achieve the annual revenue collection targets. There is a need to formulate a national tax policy in consultation with all the stakeholders. The ratio of the taxpayers, who voluntarily pay taxes as national obligation is very small, but tough rules and regulations also open flood gates of corruption and mismanagement. The current tax system is allegedly marred by corruption and fraud, and as a result, the tax-to-GDP ratio is worse than it was in a couple of decades ago.