Taxation in Pakistan is a cornerstone of the country’s economic framework, managed by the Federal Board of Revenue (FBR).
The FBR also plays a crucial role in drafting tax-related legislation and implementing measures to combat tax evasion.
The taxation system in Pakistan encompasses both direct and indirect taxes, which contribute significantly to the nation’s revenue.
Initially, Pakistan inherited the tax structures and administrative mechanisms of British rule, which included a comprehensive framework for indirect taxation.
Key reforms have included the introduction of progressive income taxation and tax incentives to support industrial growth.
Taxation reforms over time have included digitalization, such as the introduction of computerized systems and electronic filing methods, aimed at improving tax compliance and streamlining processes.
The Income Tax Act of 1922 was prevalent during the British Raj and was inherited by both the governments of India and Pakistan upon independence and partition in 1947.
[4] IT (Income Tax) rules 2002 were promulgated by the Federal Board of Revenue (FBR) on 1 July 2002 in exercise of its powers granted under section 237 of the ordinance.
[12] A specialised advance Inventory management and POS system is specially developed for retailers in Pakistan keeping in focus the info security and integrity of data and processes involved.
[16] Despite its potential, Pakistan's taxation system faces several significant challenges: The government has introduced various reforms and initiatives to address these challenges and improve the tax system: The FBR fell short of its revenue target for the first two months of the current fiscal year[clarification needed] but still surpassed its annual collection target for FY23, reaching Rs.
The IMF has supported Pakistan through programs like the Extended Fund Facility (EFF), which focuses on structural reforms aimed at enhancing revenue mobilization.
However, inefficiencies within the system have hindered the full realization of tax revenue potential, necessitating ongoing reforms to enhance efficiency and equity.
Pakistan aims to further digitize its taxation system to increase transparency, reduce bureaucracy, and foster a culture of tax compliance.
Structural reforms are expected to enhance revenue collection, reduce dependency on external borrowing, and move the country toward a more equitable and efficient tax system.