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Tax-to-GDP ratio is not an indicator of actual economic strength of Pakistan

Published on 4th Jan, Edition 01- 2016


New tax scheme introduced by present government may give a big push to tax regime in Pakistan

Tax-to-GDP ratio, which revolves around 10-11 percent does not reflect the actual strength of the economy primarily due to a vast majority of trade and industry avoid documentation on various grounds including chronic issue of corruption, misconception about tax regime due to lack of education and last but not the least the insignificant returns of the tax benefits to tax payers.

The present government is hectically engaged with economic issues with an ambitious target of achieving a 7 percent GDP growth rate in next couple of years has, however, taken some appreciable initiatives for improving tax-to-GDP ratio.

Among these indicatives the latest is the launch of the Voluntary Tax Compliance scheme, which is expected to give a big push to tax-to-GDP ratio in Pakistan.

While launching the scheme Prime Minister Nawaz Sharif has urged the business community to pay taxes transparently for greater development and prosperity, through the launch of the Voluntary Tax Compliance scheme.

Government is determined to defeat challenges and has taken the challenges head on to steer the country out of crisis and put on the path of progress and prosperity. The Prime Minister said, “We have to defeat challenges at any cost”. As a result of measures taken by the Government, the situation looks much better compared to three to four years ago.

Nawaz Sharif with a positive gesture showed to business community said that the Government believes in resolving issues with understanding and consultation.

This spirit will take the country forward on the path towards progress and prosperity besides helping out to end problems of the country like terrorism, poverty and unemployment.

The premier told traders the government has taken steps towards resolving issues such as the restoration of law and order in the country and counter-terrorism. “Peace in Karachi is necessary for peace in the entire country”, hence the government is taking steps to reform in the sectors including health, education and road links all across the country.

It is heartening to see that the situation in the country has improved in comparison with the state of affairs 3-4 years ago while the economic reforms have started yielding positive results and it is strongly believed that economic prosperity would help change the fate of the nation, the Prime Minister said with a great amount of confidence.

“Traders play an integral role in the development of economy while the government is determined to provide support to traders in every way possible,” said the premier. “The PML-N led government has stepped forward to deal with internal and external challenges while policies are being devised after consultation with the relevant stakeholders in this regard” in order to steer the country towards progress.


Minister for Finance Senator Mohammad Ishaq Dar present on the launching ceremony also urged the business community to take optimum benefit from the Voluntary tax filing scheme and supplement government’s effort for achieving economic sovereignty and self-respect for Pakistan. “Today’s tax scheme is a scheme for the interest of the country and its every ones day of success”, he told the business community leaders. Ishaq Dar, however, clarified that this scheme would not be applicable for the members of the parliament and only traders could benefit from this scheme. The Finance Minister reiterated the government commitment to check leakages, theft, corruption and completely eliminating the SRO culture besides ensuring transparency, good governance and accountability in the government tiers for the prosperity of the country.

Finance Minister Ishaq Dar informed the gathering of the traders that government has decided to table voluntary tax scheme for non filers to the Parliament to fulfill its legal requirement and approval from the parliament.

The government has reached an agreement after extensive five months parleys with business community leaders and the government, which now determined to get its approval from the parliament and make the scheme as part of the bill.

The business community is expected that they would fulfill their commitment and visit city to city and streets and add one million assesses and gradually it would be increased 2 million assesses in the country.

The government has doubled the development budget from Rs600 billion to Rs1200 billion for the prosperity of the country and welfare of the people.

Special Assistant to Prime Minister on Revenues, Haroon Akhtar Khan also spoke on the occasion and said number of tax filers have been increased from seven hundred thousand to one million. He said SROs worth Rs223 billion have been abolished and no concessionary SRO has been issued. He said now SRO can only be issued with the approval of elected parliament.

For the first time a separate system has been introduced for non-filers. He said the scheme would benefit the traders who have not filed their returns for the last ten years. He said those who filed their return of worth one million rupees are not required to file wealth tax under the scheme.

FPCCI’s Welcome

Newly-elected President of Federation of Pakistan Chambers of Commerce & Industry (FPCCI) Abdul Rauf Alam, while welcoming the new scheme for non-filers has said that launch of a Voluntary Tax Compliance (VTC) scheme through consensus after approval by the Members Legislative Assembly and Senate would certainly help increasing the number of assesses in the tax net.

The FPCCI Chief elaborated that a meeting was called by the Prime Minister on the initiative of the Chairman Federal Board of Revenue (FBR), Nisar Muhammad Khan, which was attended by about 400 small and medium traders under the aegis of FPCCI President. The VTC scheme is aimed to register non-filer traders and regulate the undocumented economy and as such they would be allowed to file Income Tax Returns on the payment of due tax (principle amount) along with 1 percent of the declared amount, by the 31st Jan, 2016.

The President of FPCCI disclosed that the VTC scheme has been finalized after five months of detailed and hectic series of negotiations with the traders, through the courtesy of FPCCI President, after accepting almost all the major proposals and demands raised by the small and medium traders of the country.

FPCCI Chief expressed the hope that the scheme would go a long way to broaden the tax net and appealed to the potential taxpayers to avail the opportunity and pay tax transparently for greater development and prosperity and fulfill their national duty as collecting more taxes would help build a stronger economy, reduce unemployment and poverty, attract more investment and fortify the country in the fight against terrorism. At the same time he also urged the FBR Chief to extend his full support, cooperation and facilitation to the new taxpayers availing the scheme.


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