Muneeb ur Rehman

Pakistan needs to simplify its complex tax system and improve compliance procedure in order to attract investment and boost the economy. Talking to the WealthPK, Adil Ameen, Chairman of the Tax Advisory Board of the Institute of Cost and Management Accountants of Pakistan (ICMAP), said the market health relies on the business community’s confidence, adding that the current taxation system is one of the factors that should be designed in accordance with the aspirations of businesses. According to the Gallop Survey of Pakistan, 66% of businesses currently view their operating conditions as either poor or even worse. Notably, there has been a notable 7% rise in businesses describing their conditions as "very bad." In specific regions, the survey reveals that a substantial 70% of businesses in Sindh and Khyber Pakhtunkhwa (KPK) perceive their conditions as unfavorable, while in Punjab, a still considerable 64% shares this perspective.

Adil said the process of filing taxes in Pakistan is complex and time-consuming for businesses and individuals, which discourages tax compliance. One rationale motivating the government to maintain a complex and frequently changing tax system, he mentioned, is the imperative to meet its revenue demands. “While achieving revenue targets is important, the tax system should not solely prioritize this objective. Instead, it should encompass a broader set of economic goals,” he added. He stressed the importance of having a simple tax system, saying, “A simple tax regime would lower the costs of taxpayers during the compliance process. It would also reduce the cases of tax evasion and underreporting, which are common problems in Pakistan.”

The World Bank’s latest “Ease of Doing Business” report ranked Pakistan 161st out of 190 countries in the category of "paying taxes" indicator. Underscoring the role of provinces in reducing tax complications, Adil gave the example of the Sindh government. “The Sindh government is introducing e-governance in its respective revenue departments in collaboration with the Punjab Information Technology (IT) Board. It will include e-tracking of the document registration process, online services on mobile apps for applications in revenue offices, e-registration of documents, and land record digitization”. Indeed, Pakistan's taxation system possesses certain loopholes needing due attention. A simple tax regime and easy compliance would encourage the business communities to take part in economic activities.

Credit: INP-WealthPk