Rashid, A., Tirmizi, F. &Abbasi, J. (2013).Personal and Corporate Income Tax in Pakistan.Federal Board of Revenue (FBR) and International Growth Centre (IGC).
Individual income tax and corporate income tax together contribute over 95 percent of direct tax revenue in Pakistan. The brief compares major taxes in the years 1989-90 and 2010-11. As a share of GDP, income tax has increased from 1.67 percent to 3.2 percent, customs has declined from 5.9 percent to 1.03 percent and sales tax has increased from 1.8 percent to 3.5 percent. Overall the tax to GDP ratio has declined from 14 to 9.5 percent. The authors also shed light on the main changes in the share of taxes in GDP. The percentage of population that files tax returns for taxes in Pakistan is 0.5 percent as compared to India’s 5 percent (2010-11). Among the reasons for the decline are the lack of voluntary compliance and reduction in income tax rates in the past decade. The FBR has in 2012 attempted to simplify the tax code and increase compliance by reducing income tax slabs from 18 to 5 and introducing a progressive tax of up to 20 percent on marginal increase in income for individuals. Corporate income tax in Pakistan is the single largest contributor to the country’s direct tax revenues. These have been brought down considerably to attract international businesses in an increasingly globalized world. After giving a detail of the current trends in tax collection and the loopholes in the system the authors provide a set of policy recommendations.
Rohra, C. L., Memon, M. S. &Memon, M. A. (2009).Impact of Taxation on Financial Services Business Location Decisions in Pakistan.
This article tries to determine what a good tax system is by adding a new dimension to preceding research. The authors discuss the connection that been drawn between organizational structure of firms and their location decision making, firms aim to meet their spatial strategies, tackle ongoing structural change, the experience, capability and organization structure of the firms. The study aims to identify the impact of taxation on financial services business location decisions by examining their relationships between the determinants of decision-making process. It uses the recent trends in Pakistan on taxation and their effects on city firms. By investigating the relationship between tax system variables and other variables of business location decision-making. A questionnaire was designed and tested and then a survey was undertaken with a sample to examine and test relationship between different determinants of decision-making process. Data from financial service providers functioning especially in Sindh has been used. Results of the study show that taxation burden are positively concerned with the financial services business location decisions or that institutions are mostly only trying to avail business opportunities and are not too worried about the cost of compliance or the rules and policies of FBR.
Khan, M. A. &Alm, J. (2008) Assessing Enterprise Taxation and Investment Climate in Pakistan.
The authors suggest that the tax system of Pakistan is outdated and was designed for times and circumstances that have passed now. The system has evolved very little over time and little thought has been given to the ways in which the pieces of the system fit together. The paper proposes reducing the statutory tax rate of the corporate income tax to reduce the distortion effects and reducing the widespread use of withholding tax. They propose that withholding tax should be adjustable as a pre payment on the final tax liability of taxpayers, and should not be the final liability. They also propose reduction in exemptions in corporate taxation traded off by reduction in corporate taxation based on their meetings with business executives. They propose re examining; the complications that arise due to tax incentives and exemptions, the thresholds for small business classifications, continuing to improve taxation administration. The authors also point out that taxes reduce the cost to the corporation of retained earnings relative to dividends. Firms have an incentive to fragment their operations in order to be categorized as “small firms” and evade taxation. An inequitable system decreases confidence of the tax payers and increases chances for tax evasion.