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Progressive taxation in Pakistan:

The Personal Income Tax Rate in Pakistan stands at 20 percent. Personal Income
Tax Rate in Pakistan averaged 20.77 percent from 2006 until 2018, reaching an all-
time high of 30 percent in 2006 and a record low of 20 percent in 2007.

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 Data

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 Pakistan Taxes Last Previous Highest Lowest Unit

Corporate Tax Rate 31.00 31.00 43.00 30.00 percent [+]

Personal Income Tax Rate 20.00 20.00 30.00 20.00 percent [+]

Sales Tax Rate 17.00 17.00 17.00 15.00 percent [+]

In Pakistan, progressive Taxation has been very slim. The above data shows a
diseased national economy where, although personal rates of Taxes have been
enhanced in yester years, yet it failed to bring about a substantial positive change.
The below data of personal income, (world –wide,) indicates the economic results
where progressive taxation is in vogue.

Country Last Previous Range

Japan 55.95 Dec/18 55.95 55.95 : 50 %

Netherlands 51.75 Dec/19 51.95 60 : 51.75 %

Australia 45.00 Dec/18 45 47 : 45 %

China 45.00 Dec/18 45 45 : 45 %

France 45.00 Dec/19 45 59.6 : 40 %

Germany 45.00 Dec/19 45 57 : 42 %

South Africa 45.00 Dec/18 45 45 : 40 %

Spain 45.00 Dec/19 45 56 : 43 %

United Kingdom 45.00 Dec/19 45 50 : 40 %

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Country Last Previous Range

Italy 43.00 Dec/19 43 51 : 43 %

South Korea 40.00 Dec/18 40 40 : 35 %

Switzerland 40.00 Dec/19 40 40.4 : 40 %

United States 37.00 Dec/18 39.6 39.6 : 35 %

India 35.88 Dec/18 35.54 35.88 : 30 %

Argentina 35.00 Dec/18 35 35 : 35 %

Mexico 35.00 Dec/18 35 35 : 28 %

Turkey 35.00 Dec/19 35 40 : 35 %

Canada 33.00 Dec/18 33 33 : 29 %

Indonesia 30.00 Dec/18 30 35 : 30 %

Brazil 27.50 Dec/18 27.5 27.5 : 27.5 %

Singapore 22.00 Dec/18 22 22 : 20 %

Russia 13.00 Dec/19 13 13 : 13 %

Saudi Arabia 0.00 Dec/18 0 0:0 %

 Imposition of withholding Tax on 60 kinds of transactions is totally

injudicious since it is based upon proportionate basis. In contracts with
Government, the amount of tax is also included in the cost of a project
therefore; nothing is paid to Government treasury.
 However, taxation on the real estate development/housing sectors indicates
progression --- there are different rates of taxes for different cities in
Pakistan as provided by Sections 7C and 7D of the Income Tax ordinance
2001 but.

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 It is not possible in Pakistan to shift Taxation system directly to progressive
system owing to the following reasons:
a. Powerful groups of society get laws bending in their favour and there is no
likelihood of any change in this regard. Most recent example of abolishing
GIDC dues to influential and on public pressure for withdrawal of the
Ordinance, is an eye opening example .

b. Government feels it expeditious to burden the lower strata of society to

squeeze further Revenue through indirect Taxation, adding to its misery.
This is the reason that 70% of Government Revenues consists of Indirect
Taxes where poor and the affluent class pays the same rate of tax and it is a
blatant denial of economic equality—the outcome of regressive taxation.
c. On societal parlance, people abhor proper taxation yet demand all civic
facilities from Government. The Tax avoidance tendency has been imbedded
in the preconscious of common man. In Swtizerland when Government
offered to repay surplus resources to common man, the masses refused the
proposal in the referendum which shows the maturity and sensitivity of the
nation in economic matters which is exactly the opposite in Pakistani
context.
d. The principle of ‘Taxation according to capacity to pay’ is inversed in
Pakistan.
In order to bring a positive change it is inevitable to:
1. To educate people at all levels to resist negative trends as seen in the case
of withdrawal of Ordinance regarding abolishing GIDC dues as referred
above. For this purpose not only the Government but also the social
organizations have to play a pivotal part.
2. Instead oft introduction of progressive Taxation, a gradual approach
should be adopted. At first stance every person or legal entity liable to tax

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 yet out of its sphere must be brought to tax net and then any effort to
implement progressive taxation can be ensured.
3. Without proper documentation, progressive taxation is just a mirage. It
requires resilience and a strong resolve by the Government and only
documentation of economy can be a first step towards economic stability.
4. In the field of indirect taxation the progressive approach can be adopted.

The luxury items such as jewelry, expensive vehicles, residences shall

attract high rates of indirect taxation and tax burden on essential
items/commodities should be reduced as we see in Switzerland, discussed
above.