HCSTSI President spells out ‘core’ reason behind narrow tax base

HYDERABAD: President Hyderabad Chamber of Small Traders & Small Industry (HCSTSI), Muhammad Saleem Memon, has said in a statement that the core reason behind Pakistan’s narrow tax net and limited number of taxpayers is the lack of public and business community’s trust in the government’s utilization of tax revenues.

He emphasized that unless people are assured of transparent and effective use of their paid taxes, there can be no significant improvement in voluntary tax compliance.

He highlighted that despite billions of rupees being collected in taxes annually by various departments, the public and business sectors continue to suffer from a lack of basic civic amenities. Roads remain in poor condition, hospitals and schools are dilapidated, and municipal services are constantly declining. He pointed out that numerous reports, including those from the Auditor General of Pakistan, have consistently revealed massive financial irregularities and mismanagement in public funds, but no meaningful accountability has been ensured.

HCSTSI President stressed that it is impossible to strengthen the tax system without restoring the confidence of the business community. Currently, traders feel that they are being forcefully taxed, yet their issues remain unresolved. He urged the federal and provincial governments to publish detailed annual expenditure reports alongside tax collection data, so that citizens can clearly see how and where their money is being spent.

He said that if the government ensures the transparent use of public money, it would not only boost the confidence of current taxpayers but also motivate non-taxpayers to become part of the formal economy. He noted that Pakistan’s tax-to-GDP ratio is lower than other regional countries such as Bangladesh and Sri Lanka, which reflects the public’s deep mistrust in how tax revenues are managed.

Drawing comparisons with developed nations, Memon stated that one of the key reasons behind their success is the public’s trust in their tax systems. For instance, in Canada, each taxpayer receives an annual breakdown of where their taxes were spent. In Norway, citizens have access to detailed expenditures of any public project. South Korea’s “Taxpayer Bill of Rights” gives people full awareness and holds the government accountable. As a result, people in these countries willingly and confidently pay taxes.

Copyright Business Recorder, 2025