Unfortunately, only 5 per cent of people in Pakistan pay taxes directly.

The
remaining 95 per cent either do not show their income or avoid paying by
forming a close relationship with a tax practitioner and senior officer. 

There are only 3 million filers in the country.

The tax collected from Karachi’s six major markets is higher than the
combined tax collected from Lahore, Rawalpindi, Islamabad, and
Faisalabad’s largest markets

Comparing Pakistan’s tax system with that of neighbouring India, 40 million

Indians file income tax returns (ITRs) every year. So, if we take the
taxpayers as a statistic and given that India has 6 times the population of
Pakistan, then Pakistan should have at least 6.2 million ITR filers, while at
present there are only 2.2 million. 

India spends $70 billion annually on its people while Pakistan spends $6
billion annually on the people. In terms of size, Pakistan should spend $ 12
billion a year on its people. Similarly, by comparing to developed countries,
it can be seen that out of 330 million people in the United States, 142.3
million are filers. Other developed countries, such as China, the United
Kingdom, and Canada, account for up to 80 per cent of income taxpayers.

This will provide access to regular financing for the small and medium
enterprise (SME) sector, which is currently only 5 per cent of the bank’s
financing. 

Private sector credit in Pakistan is currently only 18.8 per cent of GDP,
compared to 50 per cent in India. Lending more to the private sector will
also have a multiplier effect on GDP growth. Implementing these reforms
will enable Pakistan to move on a new path towards a growing country
which can depend upon their taxes.