CSS Times

Tax System of Pakistan
Essay Material for CSS

By: Muhammad Nadeem Bhatti

Tax is the cost of living in a civilized society that people have to pay for economic development and planning. It is the realization of money in the country; tax levied by the government on goods, firms, individuals, and societies. The federal tax in Pakistan is like any other tax systems in the world. Direct and indirect taxes are classified into two broad categories. Direct taxes include salaries, interest on securities, income from property, and income from the business whereas indirect taxes include sales taxes. Unfortunately, only 5 per cent of people in Pakistan pay taxes directly. The remaining 95 per cent either do not show their income or avoid paying by forming a close relationship with a tax practitioner and senior officer. Tax collection is a major economic challenge being faced by Pakistan. There are many reasons behind the poor tax system such as; Poor management in tax offices, unprofessional behaviour of tax officials, complex and ambiguous tax laws, lack of public awareness about the tax system, harassment by the tax administration, and above all People’s hesitation when it comes to paying taxes. Lack of confidence in the state’s ability to handle taxpayers honestly and professionally and to spend their money is perhaps the most important reason why Pakistanis refuse to pay taxes. The number of non-taxpayers in Pakistan is also low because inflation is rising rapidly. On the other hand, more than 90 million people belong to the salaried class. Why doesn’t anyone ask the public leaders who give examples of developed countries that the salaries in those countries are so high that even after paying taxes, people living there get better? While here people are hungry for food. That is why a non-filer is not at all ready to become a filer. There are only 3 million filers in the country.