June 15, 2016 Print

Situated between the Middle East and the rest of Asia, Pakistan has long been both a physical and cultural bridge between the two distinct regions — and its economy has stagnated in recent years.  Islamabad-based Atlas Network partner Policy Research Institute of Market Economy (PRIME) recently released a study proposing a flat tax. Titled “Towards Flat, Low-Rate, Broad and Predictable Taxes,” the study argues that a flat tax rate would not only help combat the growing amount of bureaucracy and corruption in the government, it would also create a stable and secure future for Pakistani citizens.

“The number of tax filers has fallen significantly since 2003,” point out study authors Huzaima Bukhari and Dr. Ikramul. “The only viable option for meaningful change is to replace the existing tax system with low, flat and a predictable tax system that is simple, pragmatic, growth-oriented, and broad-based.”

Any attempted reforms so far have been patchwork, and have ultimately turned out to be “an exercise in futility,” Bukhari and Haq explain. “Tax reform commissions and consultative committees, constituted for reforming the system, have proven to be unsuccessful as they have been suggesting remedies for curing the incurable or otherwise curing symptoms rather than addressing the causes.”

The growth of the tax-collecting “market” has given rise to a host of governmental agencies and bodies, all concerned with  the enforcement of an ever-changing and consistently indecipherable tax code. In addition to cutting out and simplifying all the unnecessary bureaucratic systems that have grown around Pakistan’s complex tax system, the authors explain, it is also important to ensure that everyday people understand how much they are paying in taxes and why.  More transparency is desperately needed, and the current tax code leaves far too much room for loopholes and indecipherable legalese.  As the PRIME authors put it, “a paradigm shift is required to restructure the entire tax system to induce more investment, accelerate growth and ensure economic prosperity for the country benefitting all members of society.”

If the government continues to make merely surface-level changes and avoid the underlying causes of economic stagnation, the system will continue its downward spiral. “If we want fair and optimum collection of taxes, without hampering growth, then it is imperative to abolish the existing set of complex tax laws and enact new ones based on simple flat rate taxation,” the study concludes.