THE PAKISTAN DEVELOPMENT REVIEW
Reform Issues in Tax Policy and Tax Administration for Self-reliant Development
Similar to most countries, objectives of the taxation system in Pakistan are not well-defined. The stated objectives include resource generation, promoting arealsectorspecific economic activities, discouraging undesired imports/production, and encouraging savings and investment. These objectives have been met through a variety of tax concessions and exemptions, rebates and credits, and differentiated tax rates and tariffs. The revenue short falls/leakages resulting from preferential tax treatment of the desired activities were offset through appropriate changes in various fiscal instruments, e.g. high tax rates and tariffs, regulatory duties, extended withholding and presumptive taxes, excise duties on services, and many more. These measures, in turn, have complicated the taxation system and adversely affected the equity, neutrality and progressivity thereof.