LAHORE: The share of indirect taxes has increased by seven percent against direct taxes during the tax year 2019-20 after hovering around 60 percent on an average over the last one decade.

According to the Federal Board of Revenue (FBR) data of last one decade, the share of indirect taxes was 61.3% in 2010-11, followed by 60.8% in 2011-12, 61.8% in 2012-13, 61.1% in 2013-14, 60.1% in 2014-15, 60.9% in 2015-16, 60.1% in 2016-17, 60% in 2017-18, 62.2% in 2018-19 and 67.9% in 2019-20.

On the other hand, the share of direct tax collection has reduced correspondingly to 32.1% in 2019-20 against 38.7% in 2010-11, said reliable Board sources.

They said the structural imbalance of taxation system of Pakistan was the main reason for not allowing optimal collection because of complex taxation. Also, they added that the presence of undocumented economy and its potential of growing with unusual pace and administrative flaws provided them space to expand.

The tax experts have stressed the need of decreasing tax to increase the revenue collection in long-terms. The ratio of indirect taxes with direct taxes should be minimal because it create imbalance in burden distribution among poor and rich, they said. It is worth noting that the federal government has focused on revenue generation through the policy of a balanced tax policy.

Tax experts like Dr Ikram ul Haq and Shahid Pervez Jami are of the view that there is a need to document that informal sector by reducing tax reductions or amnesty for these informal units of economy. In the long run, they said, their contribution would slowly adjust in taxation system and the informal sector would start taking part in the tax growth of the country.

Jami said taxation policies and development have been linked together, as any bad tax policy could lead to a default like situation.

Copyright Business Recorder, 2021