Taxation System of Pakistan

Pakistan’s Current Taxation system is defined by Income Tax Ordinance 2001, promulgated on 13 September 2001, which became effective from 1 July 2002. Taxes are required to meet the expenditure and spending that a country needs to give out its people. Pakistan operates through hybrid system, Federal Board of Revenue (FBR) collects taxes on goods and the provinces impose on services.

Main Concern of Pakistan’s Tax Policy

Government collect taxes from its people in order to spend the collection on the welfare and well-being of its people which includes debt servicing, national defense and other welfare related issues. Our current tax collection system has many flaws which comprises of loopholes in the system that go along with the corruption of Federal Board of Revenue (FBR) officers which speaks about the justice and fairness of our government officials for their people. There favors to their delighted people are the major root cause of the corruption that weaken the taxation system of the country.
The current tax-to-GDP ratio in Pakistan is 12%, which is lowest in the SAARC countries as compare to other countries. If we compare this ratio with any of the developed countries, we are far below in numbers. The tax-to-GDP ratio in other continents like Australia is 25.8%, in America 26.9% and all European countries around 37-39%. The world bank report shows Pakistan GDP graph of last 8 years.

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