Pakistan has a complex tax system with over 70 unique taxes administered by 37 agencies. The tax system is outdated and suffers from poor management, unprofessional tax officials, complex laws, and a lack of public awareness. While only 5% of Pakistanis pay taxes directly, the majority also form close economic relations with those who do. The government is seriously indebted and tax collection is a major economic challenge. According to a survey, the city of Karachi generates the highest taxes, with some markets paying over 30 billion rupees compared to other major cities whose highest earning markets pay only a fraction of that amount. The document recommends tax reforms to increase the tax net and reduce taxes on the formal sector.

3. P R E S E N T E D B Y
MUHAMMAD JAWAD IRFAN
& BASHAAR FAROOQ
Tax Structure of Pakistan

4. PAKISTAN’S TAX SYSTEM FACTS
⚫Imposing a financial charge by the state.
⚫ Complex system of more than 70 unique taxes
administered by 37 agencies
⚫The tax system is outdated
⚫The government is seriously indebted

6. Fundamentals
• Direct and Indirect Taxes
• 5% pay directly, rest form close relations
• Major economic challenge
• Poor management in tax offices, unprofessional
behavior of tax officials, complex and
ambiguous tax laws, lack of public awareness.

7. Not only Public’s Fault
• Rising inflation
• 90% salaried
population
• Low salaries
• Less filers
• Deficit of
payments
• Financial aids

8. Tax Collection
• According to a survey by the Federal Board of Revenue
(FBR), Karachi is the highest tax-generating city.
• The tax collected from Karachi’s six major markets is
higher than the combined tax collected from Lahore,
Rawalpindi, Islamabad, and Faisalabad’s largest markets.
• the markets of Saddar, Tariq Road, Clifton, Golimar,
DHA collectively pay taxes of Rs30.87 billion.
• In contrast, Lahore’s four major markets paid Rs567
million in taxes, including Anarkali, Mall Road, Hafeez
Center, and Liberty Market.
• Islamabad’s major markets paid Rs1.93 billion in taxes.

9. Performance is low
• The important thing to consider here is that why the
businessmen of Liberty, Shah Alam, etc., which earn
millions of rupees every day, are reluctant to pay taxes?
• It is clear that the performance of tax collectors is much
worse and it needs to be improved.
• Comparing Pakistan’s tax system with that of
neighbouring India, 40 million Indians file income tax
returns (ITRs) every year.
• India has 6 times the population of Pakistan, then
Pakistan should have at least 6.2 million ITR filers, while
at present there are only 2.2 million

10. Avoidance
• India spends $70 billion annually on its people while
Pakistan spends $6 billion annually on the people.
• In terms of size, Pakistan should spend $ 12 billion a year
on its people.
• Similarly, by comparing to developed countries, it can be
seen that out of 330 million people in the United States,
142.3 million are filers.

11. Government performance
• Talking about the performance of the government, it can
be said that the existing dominated system of FBR has
failed to perform well in any area.
• That’s why tax reforms need to be introduced which will
increase the tax net through proper documentation while
reducing taxes on the formal sector.
• This will provide access to regular financing for the small
and medium enterprise (SME) sector, which is currently
only 5 per cent of the bank’s financing.

12. Conclusion
• Government should take notice of all of the departmental
issues and take the people into confidence.
• Government should take immediate and meaningful
steps to increase loans to the private sector through tax
incentives.
• Lending more to the private sector will also have a
multiplier effect on GDP growth.
• Implementing these reforms will enable Pakistan to
move on a new path towards a growing country which
can depend upon their taxes.