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Pakistan Tax Policy Report: Volume I
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The main message of this report is that Pakistan can take measures to increase the tax to gross domestic product (GDP) ratio by around 3.5 percentage points over the next five years. In order to ensure a healthy long-run economic development, Pakistan needs to embrace substantial changes in tax policy aimed at increasing the buoyancy of the tax system, broadening the tax bases, reducing distortions and phasing out exemptions. Such tax reforms are also required to deal with the risks stemming from sustained large budget deficits. Failing to act sooner rather than later, only makes the problem more difficult to address without considerable instability, raises the probability of fiscal and financial disarray at some point in the future, and runs the risks of further constraining policy flexibility in future. This report highlights design ingredients for a comprehensive reform of tax policy in Pakistan. In the final analysis, the success of tax reform will depend less on the mechanism of taxation and more on the politics of taxation. Beyond adequate administrative resources and an implementation strategy, this will require a clear political recognition of the importance of the task and the willingness to persist with tax reform over the long haul.
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Pakistan Tax Policy Report: Volume II
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The main message of this report is that Pakistan can take measures to increase the tax to gross domestic product (GDP) ratio by around 3.5 percentage points over the next five years. In order to ensure a healthy long-run economic development, Pakistan needs to embrace substantial changes in tax policy aimed at increasing the buoyancy of the tax system, broadening the tax bases, reducing distortions and phasing out exemptions. Such tax reforms are also required to deal with the risks stemming from sustained large budget deficits. Failing to act sooner rather than later, only makes the problem more difficult to address without considerable instability, raises the probability of fiscal and financial disarray at some point in the future, and runs the risks of further constraining policy flexibility in future. This report highlights design ingredients for a comprehensive reform of tax policy in Pakistan. In the final analysis, the success of tax reform will depend less on the mechanism of taxation and more on the politics of taxation. Beyond adequate administrative resources and an implementation strategy, this will require a clear political recognition of the importance of the task and the willingness to persist with tax reform over the long haul.
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Pakistan Tax Policy Report: Tapping Tax Bases for Development
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Pakistan’s economic development is once again threatened by macroeconomic imbalances. Broadly speaking, high growth in the 1960s was followed by low growth in the 1970s, and high growth in the 1980s by low growth in the 1990s, as macroeconomic vulnerabilities derailed development. Supported by a favorable global environment, Pakistan returned to a strong development record for much of this decade. Growth accelerated and fiscal and social indicators improved. But as in the past, the gains proved unsustainable, as economic policies adjusted too little and too late to a deterioration in the external environment. The looming crisis is threatening to undo much of the recent development progress.
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Incidence of Taxes in Pakistan: Primer and Estimates
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Who pays Pakistan’s taxes? Do they fall inordinately on low-income families, or on labor working in the formal sector, or is the tax burden borne disproportionately by the higher income classes, who also own most of the capital in the country? The fairness of the tax system is not only affected by who pays taxes, but by who does not. The latter group might include those working in the hard-to-tax informal sector, agriculture, those who benefit from legal exemptions, and those who evade taxes.
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Pakistan: Comprehensive Individual Tax Reform
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The fundamental proposal for comprehensive individual income tax reform in Pakistan is to provide an integrated income tax structure that pertains to income of all individuals (including non-incorporated businesses) and which otherwise dramatically simplifies the taxation of individual income in Pakistan. An integrated individual income tax would treat individuals (salaried employees, self-employed businesses, and other non-corporate entities) in a similar way by applying a given tax rate structure to taxable income.
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Pakistan's Tax Gap: Estimates By Tax Calculation and Methodology
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This report provides estimates of Pakistan’s tax gap by type of tax and describes the methodologies and data used to produce these estimates. A country’s tax gap is the amount of tax that goes uncollected due to non-compliance with the tax law. For estimation purposes, the operational definition of the tax gap is the difference between potential and actual federal tax revenue, where potential revenue is the amount of tax that the government would collect if everyone fully complied with the tax law. It is a simple matter to get actual tax collections by type of tax, so the trick to estimating a country’s tax gap is to obtain a reasonably accurate measure of potential tax revenue. Our basic strategy is to use micro-simulation models to estimate the potential revenues from Pakistan’s federal taxes of which there are only a hand full. Such modeling requires micro-economic data with information about the relevant tax bases and a tax calculator to simulate tax liabilities by type of tax. The advantage of this approach is the detailed information that it provides on the rate of compliance by type of tax which should be helpful in targeting scarce tax enforcement resources and in evaluating tax policy reforms.
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Assessing Enterprise Taxation and the Investment Climate in Pakistan
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The Pakistan system of taxing enterprises has undergone some major changes in recent years. Nevertheless, the corporate tax system remains plagued by a number of problems. The existence of numerous exemption programs has significantly reduced tax revenues, and has greatly distorted the allocation of investment across sectors and asset types. There also seems to exist significant amounts of tax evasion, evasion that also distorts resource allocation, reduces tax revenues, and compromises the distributional objectives of the system. In part as a result of tax avoidance and tax evasion, the tax base has shrunk over time, further reducing revenues and leaving the more visible taxpayers still out of the tax net. The extensive use of tax incentives is seldom tracked, quantified, and evaluated, and the intended effects on economic growth are uncertain. The incentives are only one feature of the tax system that contributes to an overly complicated system, complications that illustrate the limitations of the tax administration. The tax system was designed for times and circumstances that are long past, and the system has evolved over time in a piecemeal, ad hoc manner with little apparent thought given to the ways in which the pieces of the system need to fit together.
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Pakistan - A Globalized Tax World: An Analysis of its International Tax Practice
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The Government of Pakistan is considering an extensive tax and administrative reform by 2009 and asked the World Bank to provide a discussion paper on several technical issues. This report is dealing with the international aspects of the tax system: (a) the double tax agreements, and (b) the trade agreements.
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Tax Policy in Pakistan: An Assessment of Major Taxes and Options for Reform
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This paper undertakes a critical evaluation of the strengths and weaknesses of all of Pakistan’s major sources of tax revenue: the individual income tax, the corporate income tax, the sales tax, excise taxes and trade taxes on imports. For each major tax it describes the nature of the current tax base and the rate or rate structure that is applied to that base. After that exercise the paper identifies certain features of each tax that raise significant concerns for tax policy and constitute the beginning of an agenda for future tax reform. In each case the tax policy issues that have been flagged are discussed within a policy framework that appeals to the broadly accepted norms of “good” taxation and international experience in grappling with these issues. The concluding section of this paper sets forth for consideration an array of tax reform proposals that attempt to address the most important flaws and problems that have been detected in Pakistan’s tax system.
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Pakistan: Provincial Government Taxation
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The purpose of this study is to review the status of revenue mobilization by sub-national Governments in Pakistan, and to identify reform options that might lead to a higher level of revenues and a better functioning fiscal decentralization. This analysis is based on case studies of Punjab and NWFP provinces, and on data gathered in the course of field work in the two provinces.
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