Abstract

This study is about the taxation system of Pakistan, especially in

legal perspective, review the tax policy structure, its concerns and
recent tax reforms initiatives of current Government of Pakistan.
The purpose is to determine the tax policy scope of improvement to
meet the changing needs of the modern world and in interest of
public development and services. Pakistan’s taxation system has
complex nature, narrow approach and administrative flaws. With a
public trust deficit and corrupt practices, reliance of the government
on foreign and local borrowing can’t stop. Government has
introducing, amnesty schemes for asset declaration, tax cut for
construction industries and rewards scheme on whistleblowing, to
enhance economic activity, financial circulation and minimizing
shadow economy. In conclusion some recommendations to
legislatures for complex taxation structure to rectify imbalance
approach of tax policy.

Key Words: Tax Policy, Tax reforms, Issues of taxation,

Pakistan Tax problems, Legal Tax reforms.

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 Table of Contents
INTRODUCTION: ....................................................................................... 1
STUDY APPROACH AND METHOD......................................................... 2
LITERATURE REVIEW .............................................................................. 3
ISSUES AND CHALLENGES IN TAXATION POLICY ............................ 4
1. General Issues: ...................................................................................................... 4
a) Complex Nature: ........................................................................... 4
b) Administrative Failure: ................................................................... 5
c) Trust Deficit: ................................................................................ 5
2. Legal Issues: .......................................................................................................... 5
a) Constant Changing Needs:............................................................... 5
b) Maintain General Principle:............................................................. 5
c) Limitation of Law: ........................................................................ 5
d) Clear Interpretation: ....................................................................... 6
PAKISTAN TAX POLICY MAIN CONCERNS ........................................... 6
a) Poorly Drafted: ............................................................................................................ 6
b) Failure in Documentation of Economy: ....................................................................... 6
c) Corrupt Practices: ........................................................................................................ 7
d) Unskilled Staff ............................................................................................................ 7
e) Tax Collection Problem: .............................................................................................. 7
f) Tax Losses.................................................................................................................. 7
BRIEF CITATION OF SIMILAR ECONOMIES ........................................ 8
LEGAL TAX REFORMS IN PAKISTAN ..................................................... 9
a) Recent Legal Reforms: ................................................................................................. 9
b) Effectiveness of Legal Reforms ...................................................................................10
PROPOSED LEGAL TAX REFORMATION ............................................ 10
a) Administrative Reform ..............................................................................................11
b) Taxpayers’ Bill of Rights...........................................................................................11
c) Income Tax Law Reform ..........................................................................................13
d) Consistent Sales Tax.................................................................................................13
e) National Tax Tribunal ............................................................................................14
f) Promote Economic Growth ........................................................................................15
CONCULUSION ......................................................................................... 15
REFERENCES ............................................................................................ 16

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 TAX POLICY IN PAKISTAN:
CONCERNS AND REFORMS

INTRODUCTION:
Taxation, a vital tool to construct and shape the socio
economic policies of a country, the core objective of tax policies is
to collect revenue for government service’s expenditure while
maintaining the balance of tax burden distribution among public
with non-fictitious parameters. Pakistan has the same purpose to
receive from tax policies by setting up the effective and efficient tax
system, however, it is far from achieving desire revenue without
local and foreign borrowing to minimal fiscal deficit.

Pakistan four major sources of revenue collection are

Income Tax, Sales Tax, Federal Excise duty and Custom duties1,
keeping in view of these various tax head, the policies are proposed,
forms and execute. In legal perspective, a well-constructed
taxation system must base on, non-complex draft of legal sculpture,
systematic support from administrative hierarchy and equality in
distribution of tax burden.

Currently the main concerns with Pakistan tax policies are,

its complex nature, administrative failure and trust deficit among
state and general public. Government and its financial or legal
advisers should shift their dilemma of hunger about revenue
collection towards the greed for facilitating the economical
activates. State should stop making legal policy in isolation with the
mentality of suspiciousness on all financial transactions, this will
gradually shrink the circulation of economic activities which
eventually effect tax collection.

Many believes that increase in taxes rates and its bracket

will help in revenue generation. But in reality because of trust
deficit, it directly impact the speed of economic activities and
reduce the consumption behavior of the people which disturb tax
revenue collections, the policy in first hand aims to increase.

Financial Figures with the authentic numbers, help policies

maker to draft the master piece for tax system, but the increasing
“shadow economy” in Pakistan, making this difficult to predict the
true potential and magnitude of this economic. Imbalance in

1
https://www.fbr.gov.pk

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imposed taxes also create discriminative atmosphere, which can
easily see through the indirect and direct taxes ratio.

Picture source: ndu.edu.pk

In Pakistan every newly elected government claimed for the
huge tax reformation and this PTI Government also doing the same
and most of the reforms are sugarcoating of previous government
policies with some exceptional or slightly changes.

STUDY APPROACH AND METHOD

There has been used the empirical method of research, to
gather informational content and analysis relevant materials to
accomplish this study. Primary Sources of information are legal
provisions, ordinances2, acts3, rules4, regulations and S.R.O.s and
from official website of FBR, websites of different departments
and regulatory authorities of Pakistan, even further reviewed some
relevant news and scholarly articles.

Main objective to collect the most related data of

information regarding taxation policy, is to get the understanding
of legal framework of policy making and intent to achieve certain
targets or reasons of failure in attaining.

Being in context of legal studies, the focus is mainly on

laws structure, implementation and interpretation specifically in
field of taxation. The approach in this study is identifying the
recent reforms related to tax and intent to find the best solutions for
the problems of taxation system.

2
Income Tax Ordinance, 2001
3
Finance Acts
4
Sales Tax Rules 2006

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 LITERATURE REVIEW
In the context of Pakistan, a few articles have written on tax
reforms, most of them based on secondary sources of information
and focus on the difficulties and weaknesses of the existing tax
system, The main primary source is government acts and
ordinances related to the tax policies other than that the secondary
source come from some articles, news columns and research
papers in Pakistan perspective:
These are some main source of implementing tax policy in
Pakistan.
ACTS
i. Customs Act, 1969
ii. The Sales Tax Act, 1990
iii. The Federal Excise Act, 2005
iv. Finance Acts
ORDINANCE
v. Income Tax Ordinance, 2001
vi. Tax Laws (Amendment) Ordinance, 2021
vii. Income Tax (Amendment) Ordinance, 2021
RULES
viii. Income Tax Rules, 2002
ix. Customs Rules, 2001 (Updated Up to
09.03.2016)
x. Sales Tax Rules 2006
xi. Federal Excise Rules 2005

Pakistan Institute of Development Economics (PIDE)

Islamabad has published the book with title “Tax Reforms in
Pakistan-Historic & Critical View” by Huzaima Bukhari and
Ikram ul Haq (2020) --- this is latest conclusive work on tax reform
in Pakistan. In this research they discuss the past legacy and
current challenges in very well manner and detail.
They also provide some unavoidable solutions, which
consist on recommendation for Taxpayers’ Bill of Rights, new
income tax law and Case for harmonized sales tax.

National Defense University (NDU) Islamabad researchers

published an article with title “Tax Burden and Income
Disparities – A Review of Pakistan’s Taxation System” by Adnan
Zulfiqar Mirza, Hassan Jalil Shah & Tahir Mahmood (2018)
They focus on the inequality of tax system among poor and
the rich about the ratio of indirect and direct taxes.

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 Dawn News blog with title “Budget 2020-21: Finance bill
shows all relief, no clear revenue plan” by Mubarak Zeb Khan
Published June 13, 2020. Also, provide very latest information
about tax reforms and their future consequences.
Furthermore other studies also been reviewed which can be
seen in reference section, which provide guidance, to establishing
this research on taxation policy. The literature review help to
develop a legal framework that allows to highlight the main tax
policy options which already has been discuss and problems of
existing tax system with the recommended solutions.

ISSUES AND CHALLENGES IN

TAXATION POLICY
In last two decades, world with increasing globalization of
economic activities and now the digitalization of financial systems,
demand rapid reforms in tax system. Pakistan also did not have any
immunity against these undergoing significant changes but there
are some issues and challenges in the way of reforming tax system.
These are the futuristic approaches to make better policies but in
domestic structure and current situation with the limited resources
these are the main concerns of Pakistan taxation policy, like other
developing countries:

 Complex Nature
 Administrative Failure
General Issues  Trust Deficit

 Constant Changing Needs

 Maintain General Principle
Legal Issues  Limitations of Law
 Clear Interpretation

1. General Issues:
a) Complex Nature:
Drafting tax policy is a complex process, which left with the
complex understanding, interpretation and execution, with these
complexities the determined target of tax collection can’t be easily
achieved. Taxation policies should be simple and easily

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understandable otherwise bad polices can restrained economic
growth and development.

b) Administrative Failure:
Administrative structure of Pakistan has categorization, Federal
board of revenue (FBR), Custom Department, Excise and Taxation
and Provincial Revenue Authorities operates as revenue collector.

These department has failed administratively, to implementing

the tax policies in effective and efficient ways. Main reason behind
that the officials of these department have non-professional
behavior with limited training and burden of work load. Pakistan
has challenges regarding lack of modern infrastructure, shortage of
skilled staff and also skills and capacity building for new and
existing officials.

c) Trust Deficit:
Public and State trust deficit is the main reason, the state of
Pakistan forefront with it, the people has concern with the
corruption and mismanagement of their tax money.

2. Legal Issues:
a) Constant Changing Needs:
Tax policies maker has to be more informed as compare to
other general policies maker, to meet the constant changing needs
of field of taxation. Government and their adviser should keep in
view this element of changing scenarios of taxation.

b) Maintain General Principle:

Legally constructing polices of taxation required to maintain
general principles of law and rules. In concept of legality,
principles related to equality, transparency, realistic approach and
futuristic method should be adopt. In tax policy, these principle
need to be maintained, which has own barriers of legal framework.

c) Limitation of Law:
Legal framework of taxation may effect by the limitations of
law, which may be bounded by the constitutional provisions5 and
international trade treaties6. In legal grounds to make law the
policy maker always consider their limitations associate with the
legal barriers.

5
Constitution of the Islamic Republic of Pakistan
6
General Agreement on Tariffs and Trade (GATT) and the World Trade
Organization (WTO), and the Articles of Agreement of the IMF

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 d) Clear Interpretation:
Taxation policies have need, to have clarity in
interpretation and to avoid contradiction with other existing tax
policies. While making tax policies, it cannot typically foresee
legal implementation with all kind of interpretation. In Pakistan,
Income Tax ordinances, Sale Tax act, Custom and Excise
regulations, provide interpretation of tax rules.

PAKISTAN TAX POLICY MAIN

CONCERNS
To understand the Pakistan Tax policy concerns, we should
know about the Pakistan tax polices structural bases, which consist
on Ordinances, Act, Rules, Regulations and Statutory Regulatory
Orders (SROs).
a) Poorly Drafted:
It has been noticed that income tax ordinance 2001, is poorly
drafted, more or less 2500 amendment inserted in it since 2002.
Supreme Court in (2009) (S.C. Pak) notice:

“Accordingly, vide notification (SRO No. 381(I)/2002), the

Ordinance came into force on July 2002, but with more or less 1000
amendments inserted by the Finance Ordinance, 2002, as mentioned by
the counsel for the respondents.”7
The new draft of Tax policy must be the product of best minds
of Pakistan, who should create the masterpiece of perfection.
b) Failure in Documentation of Economy:
Authorities are failed to document the economy of small scale
business, agricultural income and informal income. In current
government the number of registered taxpayers has touched a
record high of 3.1 million8, this is about the 1.4 % of total
population, but the tax collection has not been increase.
Mostly people in Pakistan are employed directly with
agriculture or in small, informal business. Which get paid daily by
cash, "off the books." As a result, it is hard to predict tax reform
on assumptions. Digital economy or cash less economy is the only
answer to get the majority of the people in tax threshold. The

7
https://pide.org.pk/pdf/Books/Tax-Reforms-in-Pakistan-Historic-and-Critical-
View.pdf
8
https://www.fbr.gov.pk

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increasing number of taxpayer shows that the digitalization of
system also can help to boost tax collection.

c) Corrupt Practices:
Administrative bodies, FBR officials are involve in corrupt
practices through law making for the elite class and through
implementation of laws in benefits of accused ones for self-
benefits. The Officer with the corrupt practices also used insulted
behavior. Which should be penalized according to rule of law.
d) Unskilled Staff
Pakistan administrative staff, majority of them is unskilled and
having limited knowledge of work understanding. Which is not
their fault but government failed, in building their ability and
capacity of work by refresher courses, rational knowledge about
duties and effective training about implementation of newly
inserted laws.
e) Tax Collection Problem:
Currently, federal and provinces tax administration ineffective
to use their full potential of collecting taxes because of
enforcement issues and outdated tax system. Pakistan Tax potential
is around 12 trillion9 rupees if provincial taxes including the
income of agricultural taxes are also collected more efficiently
In the level of federal, only income tax has capacity of
collecting 5 trillion10 rupees by entering the all informal economy
into the tax threshold or tax net. But all the efforts to achieve
targeted revenue have been unsuccessful. The main root cause for
acceptance of these undocumented economy is itself the taxation
system, the improvement of this system is a delusions. Tax
collection problem can’t be fixed by patchwork, it is the waste of
time and even government constituted few more unnecessary
commissions or committees, the result always be the same and
totally useless. Tax system should be incentivize on accurate self-
assessment of income tax returns. The complex tax brackets should
be replaced by the flat rates of taxation. Voluntarily payment with
true disclosures should be encouraged with rewards and incentives.
f) Tax Losses
In Pakistan, more of the tax collection is spend on loan
settlement and repayments. This imbalanced situation can only be

9
Source: Pakistan Institute of Development and Economics (PIDE)
10
PIDE

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solved by the new policy reforms with the approach of fiscal
stability. Answer of this question is very straight and simple. As
per the available data federal government required almost 8 trillion
rupees of revenue collection to meet all spending expenditures, to
achieve this the fair, certain and simple tax base is vital. The
complexity of tax system, only be beneficial for powerful people,
the corrupt officers exploit their discrepancies of financial
activities. These all elements causing the loss to tax revenue. Tax
reforms to eliminate the tax losses only be possible by simple tax
rates which neither oppressive nor tough to implement, but it is
necessity of time that this complex, outdated and anti-growth tax
system should be upgraded by the futuristic tax system, which get
free the tax revenue from fiscal deficit and debt load.

BRIEF CITATION OF SIMILAR

ECONOMIES
Pakistan, the developing nation, should consider its tax
policies in connection with the similar economies like, Bangladesh,
Indonesia and India etc., having similar issues, challenges and
recourses to tackle with them.

Country Population Taxpayer Ratio

Bangladesh 166 4.0 2.41%

India 1200 14.6 1.22%

Pakistan 220 3.1 1.41%

Number in Million(s)
2020 Y

Bangladesh, India and Pakistan, upfront with the similar

kind of concerns i.e informal economy, corruption and unskilled
staff and which required almost the same kind of reforms.
The needs of designing new tax policy and reforming an
existing tax policy have different needs, which in the end, left us
with the different results. So it is important to don’t overlook these
kind of points while making tax policy.
The Tax structure in India and Pakistan consists on these parts:
 Central/ Federal Government
 State/ Provincial Governments

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 The Indian government also collect taxes by using direct
and indirect taxation method like Pakistan. Which create economic
imbalance in society.

LEGAL TAX REFORMS IN PAKISTAN

Tax reforms in Pakistan, every new government claim to
perform but have miserably failed. It is the matter of priorities and
willingness to achieve the desire result from implementing tax
reforms. Structural reforms in tax system has not took up serious
by any government.
Tehreek-i-Insaf (PTI) Government, also come up with a
reform programs, which they believe will revamp the tax structure.
Main taken initiatives are discuss below:

a) Recent Legal Reforms:

PTI Government believe to raise an optimal collection of taxes and
they start taking steps to achieve that goal by different schemes of
amnesty, immunity, reduction or subsiding to few industries.
 Amnesty for asset/income declaration
 Amnesty for Real-estate/ Construction
 Reductions for Textile Industries
This Government also established the Tax Reform Committee,
which they call “best minds of country” who may look after the
reform agenda of long term strategies about optimal revenue
collection and resource utilization. Committee also suggesting for
entirely new tax administration with the establishment of National
Tax Authority (NTA). All existing Tax authorities of Pakistan
could merge into NTA.
 Digital Facilitation
This is the previous Government (PML-N) initiative to digitalize
FBR to facilitate taxpayers and current Government also
empowering this step by introducing new features. Taxpayer can
easily file Tax Returns from home or offices and can communicate
online with FBR officials to file request of Appeal, Condonation
and rectifications.
These all reforms are required some legal procedural steps in
accordance with Presidential orders, Circulars and SROs to get a
legal status.

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 FBR Income Tax Target
Tax to Ratio in total taxes
Growth in Target
GDP (%)
Year Targets Collection Collection Achieved
ratio
Indirect Direct
(%) (%)
taxes taxes

2010-11 1,667 1587.0 19.6 95.2 8.8 61.3 38.7

2011-12 1952.3 1883.0 18.2 96.5 9.1 60.8 39.2

2012-13 2007 1939.4 03.0 96.6 8.5 61.8 38.2

2013-14 2275 2254.5 16.0 99.0 8.8 61.1 38.9

2014-15 2810 2589.9 13.0 92.2 9.2 60.1 39.9

2015-16 3103.7 3112.4 20.2 100.3 9.6 60.9 39.1

2016-17 3621 3367.8 8.0 92.9 9.8 60.1 39.9

2017-18 4013 3842.1 14.1 97.6 10.4 60.0 40.0

2018.-
4435 3828.5 (-) 0.35 86.3 8.4 62.2 37.8
19

2019-20 3908 3996.7 4.4 102% 9.1 67.9 32.1

Numbers in billion(s)
Source: FBR Yearly Books
Statistical truth of numbers speaks itself and after the digitalization
of income tax, increase in collection can see gradually.

b) Effectiveness of Legal Reforms

Legal reform can create difference in effectiveness of tax
reforms. A legally well-drafted tax policy with no loophole helps,
to get the targeted optimal tax revenue, to avoid borrowing and to
reduce fiscal deficit.
Eventually, Tax reform effectiveness can make good difference
in millions of Pakistanis life, it gave government resources and
which can be used for development of general public.

PROPOSED LEGAL TAX REFORMATION

Impactful Improvement always come with the combinations of
short and long term reforms. Before suggestion any solution to tax
problems of Pakistan, It is necessary to understand the outcomes of
these reforms that can be get.
For any reformation, every newly initiation or insertion in
taxation system, need legal umbrella. Which can help in

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administrative functioning, implementations, prosecution in case of
wrongdoing, recovery of revenue and penalizing the accused.
On the other hand of law, it also provide the protection to
the wrongly accused person and also law can guarantee the remedy
in case of loss.
Legal tax reforms somehow based on these four needs
 Administrative support
 Implementation procedure
 Prosecution material
 Penalty/ Remedy
These are some recommended proposal of legal solutions in tax
reforms.
a) Administrative Reform
Administrative approach should be changed from present
administrative structure as only a regulator to also with addition of
facilitator of taxpayer and do the need full things to bound
administration officers legally. Administrational structure play
very vital role in the revenue collection because this is the front
line of all implementations.
Any corrupt officer easily can nullified the simple tax
regulations with his self-ambition over national interest. Good
policy can be nonfunctional by bad officer but any bad policy
could have a chance to get result with honest and policy educated
officer.
b) Taxpayers’ Bill of Rights
Federal Board of Revenue (FBR) behavior of suspicion and
disbelief towards the taxpayers, are increasing disbelieve in
taxation system. The reason behind this disbelieve are different:
First reason, FBR official’s inconsideration behavior with
corrupt practices shaped the atmosphere of disbelief among the
taxpayers and the State.
Second reason, the newly elected governments didn’t take any
measure to build that trust relationship and failed to develop the
elderly relation with taxpayers. The government on the other hand
also putting an effort to increase this distrust level by the useless
projects without any priorities behavior , unfortunately that is a
waste of taxpayer money, that need to be protected by the rule of
laws.

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This trust deficit can be reconciled by taking few steps which
provide the sense of trust among the taxpayers. State can easily
create that kind of situation to build the relation with public.
The procedure related to the tax reform need rational approach of
state for the nation progress. Meanwhile, the Government may
issue the “Bill of Rights” in connection with restoration of
taxpayer’s confidence.
The provisions of the Bill must:–
(a) Maintain and strengthen the rights of taxpayers
State should maintain and strengthen the rights of taxpayer
in every legal situation of need.
(b) Guarantee equality of treatment
In administrative interaction and requirements the taxpayer
should be treat equally and no any special person cloud get
the favors and other face discrimination.
(c) Privacy of declaration
Government should ensure the privacy of taxpayer’s
confidential information about declarations and that cannot
be used for blackmailing.
(d) Right to assistance
State has fully assistance or facilitation center for the
taxpayer guidance in time of assistance.
(e) Right of Appeal
The right to appeal is already exist for taxpayer but it need
to be simple in procedure and time barded.
(f) Facilities for independent judicial Review
Taxpayer should have the right of independent judicial
review of his judgment.
The idea of is this bill come from the US bill of rights. In United
States and United Kingdom this bill of right in tax matter is
implemented and have very successful implication. But in Pakistan
the issue is with, approach of administration and public, towards
the tax policies, they acted in a very narrow-minded mentality.
In Pakistan, only the 1% of population files tax return and in this
1% mostly provide the wrong data. Even then this is a matter of
perception, Taxpayers needs these kind of rights to feel importance
and get educated with the future returns.
The Taxpayers negligible behavior only can be changed by the
impression of respect, this sense of respect or not being treated as
thief before evidencing any concealment.

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The current tax policies are based on protecting elite rights not for
the protection of all taxpayers’ rights.
c) Income Tax Law Reform
Both income tax ordinances are made in non-Democratic
governments of General Pervez Musharraf and General Zia ul haq
which made by individuals and left with the imperfection and
flaws with complexity. This need to be revised by the parliament
after a reasonable debate about all aspects of income tax policy.
Income tax is main source for governments to collect revenue for
its spending expenditures and very oddly and alarmingly no any
elected government take any initiative to revised these income tax
policies and come up with the better ordinance after the national
debate or recommendations .
Income tax reforms are very much need of the time and any
recommendation in income taxation ordinance are welcomed and
government adviser should consider while drafting that it must be
simple, certain, equity and transparency factor.
In Pakistan also the Income tax is the major source of tax
collection and its need to be more proficient.
d) Consistent Sales Tax
In this modern world, Pakistan need to be consistent with
its sale tax policies especially in connection with the GST and
VAT. Current policy has devastative need to change in fiscal
policy.
Federation has power over levying tax. This power is
given by the Constitution of Islamic Republic of Pakistan which
explain the federal right over provinces to levy sales tax on goods
within their respective territories, this power is available to
federation from independence.
After the 18th amendment in constitution and Seventh
National Finance Commission Award, still it is not questionable by
the provincial governments. Same goes with the provinces in
matter with the local government powers related to the
administrative and fiscal matters, powers did not handover the
local administration, the Article 140A of the Constitution gave the
right to the local governments but presently it is not in functions
because of political dishonesty.
Provincial contribution in revenue is about 6 to 8 percent
approximately, and the provinces are totally dependent on federal

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government. This situation is explain in the article of 160 of
Islamic republic of Pakistan constitution. Only right the provinces
have collect taxes, to levy sales tax on services, which also
partially took by federal in shape of the Income Tax Ordinance,
2001 and sales tax on services related to gas, electricity and
telephone services. Excise duty on a number of services also the
subject matter of federation.
This imbalance nature of relationship among federation and
provinces about sales tax policy, could be more balanced and
consistent to collect revenue more efficiently.
e) National Tax Tribunal
Pakistan has an appeal structure of tax tribunals against the
commissioner final assessments. But these are very limited and
there is a need for the National Tax Tribunal, to facilitate the
taxpayers of the society. Because the taxpayer is an asset of nation,
who must feel safety against tax administration unjust. In most of
the societies, administration and justice coexists for the purpose of
check and balance. Any Tax reforms could not survive too long
without the effective judicial system, with the power of sounds
legal provisions. Pakistan has these kinds of law provisions, which
need to be upgrade with serious actions, but tax system is on the
edge of destruction. There is need to control tax administration
with the rule of law, that could be implemented by tribunals on the
time of need.
Public dissatisfactory behavior on administration judgments
can lead to the tax dispute and Pakistan has provisions in law to
resolve it with tax dispute resolution system, But this consist on
traditional appeal and review criteria.
Recently the appeal filing structure got digitalize and taxpayer
can file appeal to commissioner Inland Revenue directly by online
prescribed manners.
The Trust Deficit with government officials, in over society
deeply inserted, that somehow have valid reason because of the
unprofessional behavior of administrators. Pakistan has almost 3
million registered taxpayers in end of 2020 and UK almost has the
same number of taxpayers, but the ratio of Appeals against
administration judgments is totally different. In UK average Tax
consular received 30 appeals in a years but in Pakistan almost all
judgments go in tribunals for appeal and review.

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 f) Promote Economic Growth
Any perfect tax reform can easily contribute in rapid economic
growth and it is understood fact that the tax is a byproduct of
growth. Economic development in private sector can enhance the
investment which ultimately increase tax revenue, so economic
growth should not be stop by any dubious tax policy.
The recommendation in this regards to promote the economic
growth without any anti-growth activity, is to attach taxation
system with rewards and encouragements.

CONCULUSION
The conclusion outline from this study confirm that
structural imbalance of taxation system of Pakistan can’t allow for
optimal collection because of complex taxation. The presence of
undocumented economy and its potential of growing with unusual
pace and administrative flaws provide them space to expand,
which must be stop on time before it become impossible or
difficult to change. There is a need to document that informal
sector, for large setup, it is difficult to operate or remain as
informal way so in the beginning of reforms provide reductions or
amnesty for these informal units of economy, in the long run their
contribution will slowly adjust in taxation system and will take part
in tax growth of nation.
These reforms required the legal shadow to be more
productive and efficient in revenue collection. Taxation policies
and development has been linked together and any bad tax policy
can lead towards the default. Therefore the main objective of the
government in Pakistan related with the tax reforms, it should be
the simple taxation system which can be based on equality,
certainty and transparency.
The conclusions also in favor of decreasing tax to increase
the revenue collection in long terms, as most of the tax scholar
recommend. The ratio of indirect taxes with direct taxes should be
minimal because it create imbalance in burden distribution among
poor and rich. Eventually the Government has the main focus of
revenue generation, which can be achieved with balanced tax
policy.
In the end the taxation reforms with legal support can only
be survive, implement and executed, to attain the desire revenue, to
increase economic growth.

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Electronic copy available at: https://ssrn.com/abstract=3791148