Tax Reforms in Pakistan: Historic and Critical View (Book)

In their book entitled Tax Reforms in Pakistan: Historic & Critical View authors Huzaima Bukhari and Ikramul Haq take up the important yet often under-researched topic of the taxation system in Pakistan. The book is a collection of various writings on the topic by the authors spanning over three decades and has been published online by the Pakistan Institute of Development Economics (PIDE). The opening sections include a coherent overview of the issue by PIDE ViceChancellor

Dr. Nadeem Ul Haque in the Foreword, along with the Preface in which the authors themselves provide a succinct summary of the dilemma at hand. The main body content of the book is further divided into three sections: Issues, Past Legacy & Current Challenges, and Solutions.

In the Preface, the authors begin by mentioning an instance that is representative of successive governments’ general attitude towards the issue of taxation in Pakistan. In 2014, the government set up a Tax Reforms Committee (TRC) to “review and rationali se direct and indirect taxes, customs tariffs, the structure of FBR, evaluate the possibility of creation of border security force and ponder any other issue that it seems fit.” Interestingly enough, the TRC was given just 120 days to complete its task. The finance minister and the management within the Federal Board of Revenue (FBR) were “naïve” enough to assume that a task as monumental as coming up with a well-researched reformative agenda for the tax system in the country could be completed in just 120 days. Naturally given the size of the work at hand, TRC took 500 days to submit its final report. This report has not yet been published by the government despite it being in circulation through alternate channels. Among the many important points the TRC’s report makes, it also lists which according to the authors is one of the fundamental issues that afflicts Pakistan’s tax system i.e. the system is regressive in that it “exhorts from the masses” while continuing to give out innumerable tax exemptions and concessions to the rich and mighty. Indicative of this regressive trend is the record level of tax expenditure (concessions) of about 1.5 trillion rupees handed out by the government in FY 2019-20. Another significant issue that the authors take up here is the dire need for an effective tax administration system. According to them, the failings of the current system under the FBR are highlighted by the fact that the bulk of all income tax revenue comes from withholding taxes.