SHORTCOMINGS OF TAXATION SYSTEM IN PAKISTAN

1. IMBALANCED COMPLIANCE WITHIN CORPORATE SECTOR

As per stats of January 30, 2020, out of 105,407 companies that are registered with the

Security and Exchange Commission of Pakistan, only 35,233 companies are filing tax

returns. The lower number of filer companies shows highly disappointing compliance

within the corporate sector of Pakistan. Due to this substantially threatening flaw,

Pakistan’s tax system generates not more than 10% of the GDP of Pakistan. Moreover,

out of these 35,233 companies, greater than 75% of tax is paid by the manufacturing

sector of the Pakistani Industry. This has affected the sector while creating an imbalance

of tax collection from the Services Sector and Manufacturing Sector. The number of

companies filing for tax returns has increased substantially from what it was in 2018, yet

the number is not satisfactory. Government besides making Filing procedures easy and

incentivizing companies have initiated helplines and complaint systems for the

companies to expand the tax base from the companies. Yet it has been seen that the

companies have not more of trust in Government. Whatever the reason may be for not

filing for tax returns for the companies, it is inevitable for the Government to take

initiative to increase the taxpayer base so as to increase the tax collections and invest the

collections on the developmental projects of Pakistan.