GROUP MEMBERS

HASNAIN HAIDER (011-19-0013)

SADAQAT ALI (011-19-0033)
ABDUL REHMAN (011-17-0056)
SECTION BBA-V (A)
INSTRUCTOR SIR
SHUJAAT ALI

Course
Laws of taxations
WHY PEOPLE IN PAKISTAN ARE
RELUCTANT TO PAY TAXES?
Main reasons??
Why people in Pakistan are reluctant to pay taxes?

Tax is generally termed as the revenue or income of any country. A country imposes this tax
over the local people in order to generate revenue. Similarly, Pakistan also imposes taxes over its
local public in variety of articles.
But unfortunately, most of the Pakistanis are not willing to pay the taxes. Some of the major
reasons are as follows.
Pakistan is pursuing a mixture of direct and indirect tax techniques lion share revenue highly
skewed to 'indirect taxes'. Indirect taxes are, as the name shows, regressive as they are in nature
objective consumption generally. Direct taxes are, on the other hand, charged as a percentage
share, payments, profit, and dividends by size. These are, therefore, gradual and fairer than
indirect taxes.
The resulting regression of the tax mechanism is a natural way to promote income inequalities
instead of to reduce them with such a large proportion of indirect taxes in the 'Tax Mix' global.
High GDP taxation countries implement a progressive tax strategy that addresses revenue well
Society’s disparities.
The incidence of indirect in Pakistan taxation affects the social system as a whole that oppresses
the poor and the both prosperous and unprotected.
Direct income taxes account for 40% of the government's overall income. Tax on revenue alone
generates 28%, from which only 4% is paid Taxes on personal revenue. The government has
little to do with this inadequate collection. Choose but impose extra indirect taxes to deal with
the deficiency.
Facts have proved that increasing taxation is a major challenge facing the Pakistani government
in the near future. The stagnation of tax-to-GDP ratios at around 10% is widely attributed to a
series of interrelated factors, including poor enforcement, decentralized tax administration, non-
compliance by taxpayers, generous and distorted exemptions and concessions for the entire
economic sector, and the tax base is narrow.
The reasons for this are many, but the five of the most important reasons are discussed below:

 Poor communication of government

 Lack of fair system
 Underground (Shadow) Economy
 Corruption Lack of trust in the government
 Political intervention
Poor communication of government:

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Government miscommunication is the first reason that why potential taxpayers have no incentive
to pay. Hard-earned money is by no means an easy task. The government must clearly and
coherently explain the benefits of high tax rates for the country and how ordinary citizens’ lives
will become better. In addition, the government must actually prove that taxpayers’ money was
spent responsibly in the right place. For a start, Prime Minister Imran Khan must be commended
not only for his repeated appeals to the public for taxation, but also for his pledge to personally
participate in achieving income goals.

Lack of fair system:

Finally, a fair tax system is necessary. Salaried people are generally considered to be easy targets
for taxation, so the state has failed to expand the tax net. Several types of companies have not
paid due taxes due to their political influence, and ordinary people are overburdened with their
monthly wages. Reforming the tax system and building public trust in it will be a difficult
process. But Pakistan’s political leadership now has no choice but to make it its top priority if it
is to achieve its ambitious revenue targets.

Underground (Shadow) Economy:

It works out of the tax net and is either "visible" or "audible," it's a big drain on the state. At now,
it is believed that 70–80 per cent of our undocumented economy is GDP7. This is $100 trillion or
1.39 trillion rupees. This is really big and a major drag collection of State income. The issue of
collecting income is not as important as losing revenue due to absence of documents. The
shadow economy arises if the current government regulation channels are circumvented by
economic activity. This is largely driven by analphabetism, cash, non-bank transactions, the lack
of a culture of invoices, thriving small traders and smuggling.
It is further complicated by complex fiscal laws and regulations, high tax rates and taxpayer faith
in the tax system. A restricted tax base also leads to a higher tax rate, leading more individuals
into illegal businesses.
Only 1.21 million individuals – less than 1% of the population – pay tax under State Bank of
Pakistan (SBP). According to the SBP. The rate is the world’s lowest.
The fundamental reasons of tax evasion include corruption, political involvement in a tax
system, and a lack of confidence in the government. Many politicians may influence the
lawmaking process and participate in cash laundering and transferring capital. Corporate tycoons
are likewise avoiding paying tax since tax evasion and bribery are not penalized harshly. On the
other side we have a complex, fragmented and time-consuming taxing system. People must stand
in huge lineups to pay tax returns. In addition, illogical tax deductibles and varied tax rates lead
to tax evasion in different economic sectors.

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Corruption Lack of trust in the government:
Corruption is the major problem in Pakistan. Every citizens have involved in this evil. The main
reason that are facing crises due to corruption. Our all institutions are involve in this sin. People
are not trusting our institutions. Suppose FBR and other institutions are collecting tax they are
not using effective ways. Due to this they cannot utilize the tax money in proper ways. Due to
these factors people are not trust on government and they strike and lift to pay taxes. Once Imran
khan said there are two types of corruption in Pakistan. First one is who corrupt the system and
other one is who corrupted by the system. Local or common citizen of Pakistan is corrupted by
the system but the person who is responsible or head of institution actually he is responsible.
Who people will belief on them because they are involving in fraudulent activates.

Political intervention
Political intervention is another factor. Due to this people are denying to collect the tax. Political
factors are involving in institutions and they are changing the policies as their requirement. Due
to their intervention government cannot stable a fix tax rates and people laterally against the
policies of government. Political system is not stable in Pakistan and they are changing
according to their demands. They are using the government institutions for their personal usage.
Due to political involvement people are not ready to pay taxes.

CONCLUSION:

If we are able to improve Poor communication of government, Lack of fair system,

Underground (Shadow) Economy. Corruption Lack of trust in the government, Political
intervention. Then political system of Pakistan will be automatically change. We need to select
proper leader which will help to take proper decisions. Government should proper technology to
collect taxes. Political leaders should not involve in government institutions. Technology is the
best solutions. Government should design a proper app that everyone will pay tax online. Facts
have proved that increasing taxation is a major challenge facing the Pakistani government in the
near future. The stagnation of tax-to-GDP ratios at around 10% is widely attributed to a series of
interrelated factors, including poor enforcement, decentralized tax administration, non-
compliance by taxpayers, generous and distorted exemptions and concessions for the entire
economic sector, and the tax base is narrow. Those person who are not paying taxes government
should take serious action and NAB should also actions against those people who are not paying
taxes.

BEST OF LUCK

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