Muneeb ur Rehman

A progressive taxation system indicates a government’s commitment to creating a supportive environment for businesses to flourish. In contrast, Pakistan has a complex taxation system characterised by difficulties in filing tax returns and putting taxation burden on certain sectors while exempting others, notes Akbar A Tejani, Co-Founder of Befiler (PVT) Ltd, Pakistan's first online tax preparation and filing platform for taxpayers. He asserted that business confidence is necessary for the health of the markets, and called for restructuring the taxation system to facilitate the business community. “For promoting economic activities, the tax regime needs to provide ease of paying taxes and filing returns.”

According to the latest World Bank’s ‘ease of doing business’ report, out of 190 countries Pakistan ranked 161st for the ‘paying taxes’ indicator. While explaining the complexity of the tax system in Pakistan, Akbar Tejani said: “Filing a tax return is a cumbersome process as it requires a great deal of time, money and mental stress.” He further noted that Pakistan’s taxation system is unjustly skewed towards certain sectors, while giving exemptions to others. “Corporate tax rates on industries (manufacturing sector) are exorbitantly high, whereas agriculture and real estate enjoy privileges of lesser taxes. The government needs to introduce a flat tax system so that the business community may not feel discriminated against.”

“One reason that encourages the government to have a complex and regularly changing tax regime is the revenue requirements it is faced with,” he maintained. “Achieving revenue targets must not be the sole purpose of the tax system, rather it should have comprehensive economic objectives.” Akbar Tejani underscored the importance of a simplified tax regime. “A simplified tax regime would reduce taxpayers’ cost of complying. It would decrease the incidence of tax evasion and underreporting of taxes, which is rampant in Pakistan.”   “The undocumented economy constitutes a major part of the overall GDP of Pakistan. A simplified tax system that is certain, equitable, and easy to use will encourage people to document their economic activity,” he asserted. The taxation system of Pakistan has numerous lacunas to be addressed. A simplified tax regime would encourage businesses to play their productive role in economic growth.

Credit: Independent News Pakistan-WealthPk