Pakistan has one of the world’s worst income tax collection. With only 0.5% of the entire population registered for income tax, the FBR failed to achieve their thrice-revised tax collection target this year.
But this problem can be used as an opportunity by the government of Pakistan (GoP) because the FBR’s failure has also highlighted the fact that the GoP does not rely on income tax revenue for its budget.
The concept of income tax was introduced by the British in Pakistan. The Muslim rulers of 7-12th centuries had made many advances in finance and they were the ones to introduce the world to banking services, like bank accounts, loans, savings etc, but they never used income tax on salaries as a revenue for the government.
In fact the Muslim and Western economists both agree that taxes should only be collected on imports, consumption of natural resources and luxury items, low effort income like rent, agriculture land, chemist shops, financial services, IT etc. Natural resources are God given and they should be taxed at production and consumption level.
Collection of income tax on salaries means taxing the poorest class of the society and taxing fixed income families. Abolishing income tax, the GoP will not only help reduce poverty in Pakistan but they will also reduce the cost of FBR to the GoP. Similarly with no income tax, companies will not have to spend time and effort on maintaining these payments. Time and effort that can instead be used to increase production.
Abolishing income tax can also attract many foreign companies to Pakistan. As the trend in Western nations is that companies move their financial base to a tax-free country to avoid the high tax rates of their own country, which can be up to 50 per cent, this action will help boost the financial services sector in Pakistan, creating many new jobs and new revenue for the GoP.
ENGR SHAHRYAR KHAN BASEER
Peshawar
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