Pakistan Provincial Services Academy

Peshawar

IRP PRESENTATION
TOPIC
Tax Collection System of Khyber Pakhtunkhwa: issues and way
forward

PRESENTED BY: SOHAIL AFRIDI

SUPERVISOR: SIR TURAB JADOON

1
 Sequence of the presentation
• Introduction
• Statement of the problem
• Hypothesis
• Objectives of the study
• Research methodology
• Review of literature
• The research gap
• The research findings
• Outstanding issues in the tax collection system
• Conclusion
• Recommendations
2
Introduction
Understanding the concept of tax
 The cost of living in a civilized society

 Showcases the relationships between the citizens and the governments

which governs their lives. Hence, “taxes are share of state in income,

production and consumption”

In Pakistan, the tax collection is of two types;
1. Direct tax system
2. Indirect tax system
“The direct tax is constituted by salaries, interest on securities, income from
property and income from the business whereas indirect taxes include sales
taxes”
3
)
Introduction (cont.)

4
 Types of taxes
Tax type Levied by Description
Both This is a tax on the income of individuals and
Federal+Provincial companies.
Income Tax govt (income tax from
individuals and
companies

This is a tax on the sale of goods and services. It is

Sales Tax Both levied at both the federal and provincial levels,
with different rates for different goods and
services.

Federal Excise This is a tax on certain goods produced or sold in

Duty Both Pakistan, is applicable to goods such as cigarettes,
beverages, and luxury items.
Customs Duty Federal govt This is a tax on imports and exports.
Property Tax etc. Provincial This is a tax on the value of property owned by
individuals or companies.

5
 Statement of the problem
Multiple deficiencies that plague the tax collection in Pakistan in
particular and that of KPK in specific.
Pakistan economy is in a precarious status for decades. However,
the current situation is extremely worrisome given the
inadequate foreign reserves which constitute the backbone of
any country’s economy.
The twin deficits- the current account deficit (cad) and the fiscal
account deficit- are multiplying with each passing day which has
made Pakistan dependent on foreign donors like IMF etc.
Putting its tax mechanism in place can extricate the country and
the province from its economic woes

6
 Hypothesis

Hypothesis-1: Economic crises of Pakistan serves as

the springboard of most of her other issues
Hypothesis-2: without adequate reforms in tax
collection system at the provincial level, the multiple
crises will continue haunting the country

7
Objectives of the study

 To shed light on the existing tax collection system and mechanism

of KPK
 To gauge the outstanding issues
 To come up with some practicable recommendations

8
Research methodology

 An amalgamation of qualitative and quantitative research

methodology

 The research based on both primary and secondary data.

 Most of the data collected from secondary sources including

content analysis from newspaper articles, published research
papers and internet etc.

9
Review of literature
1. Dar Mushtaq “History of taxation: A perspective. 2022
2. Revenue division publications, 2020
3. Inam maria. Khan Shah “Pakistan taxation system”
4. Ghani Abdul. “Revamping the tax structure in Pakistan”
5. Hanif. Muhammad. “The new York times”
6. Haq Ikram. Bukhari Huzaima “Tax reforms in Pakistan
historic & critical view PIDE. 2020
10
The research gap

Only the tangible, apparent aspects are focused

Issues mainly revolves around institutions and political sphere

Recommendations mostly revolves around legal actions and

institutional reforms

11
The research gap filled by the IRP

Research findings
Bringing to light the social, psychological and perceptive aspect of our
society and the way the citizen perceive their government
Behavioral changes needed
The Social Contract Theory between the citizen and the State

12
Issues in the Tax Collection
(1) Tax-culture mentality in Pakistan

(2) The issue of trust deficit between the public and the state
“If we give to the government, the logic goes, it’s just going to
steal some more. And after stealing from us, government officials
will head off to mecca to redeem themselves in the eyes of god.”
M. Hanif “The NY Times”
(3) structural issues
(4) lack of discourse pertaining to the phenomenon of tax

13
Conclusion
In conclusion, one can bring home the point that the tax system at
the district level in Pakistan is a complex phenomenon. There is
exists a wider room for improvements and its total overhaul. The tax
collection system in Pakistan faces several issues, including tax
evasion, inefficient tax administration, complexity in tax laws, and
lack of technology. To overcome these challenges, the government
should simplify tax laws, invest in taxpayer education, improve tax
administration, and encourage electronic filing of tax returns.

14
Conclusion (Contd..)
These measures will not only increase tax revenue for the
government but also improve the overall efficiency and transparency
of the tax collection system in Pakistan. Overall, a comprehensive
strategy that combines these recommendations can help Pakistan to
improve its tax collection system and generate more revenue for
economic development. Increasing the volume of tax collection can
be one of the ways out to extricate this country from foreign loans
and IMF stringent conditionalities. Successful implementation of
these reforms can help increase the Tax-to-GDP ratio and support
sustainable economic growth in Pakistan

15
Recommendations
1. Restoring the public trust on the government: a
psychological reformation
2. Promoting tax literacy among the masses

3. Tax decentralization and fiscal federalism

4. Eradicating the complexities involving the tax laws
5. Revamping the tax administration on modern lines
6. Strengthen tax enforcement and improve the rule of law

16
THANK YOU

17