Introduction

Pakistans tax policy differs from that of most other

countries. Whereas the predominant source of
taxes in most other successful countries is domestic
activity, in the case of Pakistan, substantial portions
of taxes are derived from imports.
According to the World Bank, in Pakistan the time
required to prepare, file, and pay (or withhold) is
more than twice that for Sri Lanka and India, and
nearly four times that of Malaysia.




Difficulties
The complexity of Pakistans tax regime
Multiple rates for all taxes, including Sales Tax, Customs
and Income Tax
Most basic rates are high, there are multiple
exemptions, which give rise to severe distortion
Another problem is that within domestic taxes, over
70% of the tax burden is placed on manufacturing,
despite the fact that its share in Pakistans GDP is about
25%.
Agriculture, which constitutes about 20% of GDP,
contributes less than 1% of tax

Continue
Pakistans tax system favors income created through
inactive sources, such as rental income. Income
earned through working as a salaried person or
through business is charged at a much higher rate.
Pakistans standard tax rates are rather high. For
example, the standard rate of sales tax is 17%
compared to 12% in neighboring countries including
India and Sri Lanka
In the case of corporate tax, Pakistans rate of 35%
is higher than most other countries.
There is a need for an independent commission
to review the existing tax policy.
A large number of rich people do not pay any
taxes
High taxes on international trade slow economic
activity, make industry less competitive, and
encourage smuggling.

Practical Study
ABM Data Systems
ABM Data Systems was incorporated as a private
limited company in January 1983 in Pakistan
Its registered office is situated at Karachi
In 1985, ABM established a regional office at
Islamabad & Lahore
ABM is a leading firm in computer industry of
Pakistan with over 150 employees and a customer
base of over 5000 sites, which includes many well-
reputed organizations.
Products Of ABM
Difficulties Faced by ABM
The difficulties faced by the ABM during
calculations is the frequent changes sales tax
rates
High and variable taxes on imports of spare
parts or equipment adversely impact
investment and business decisions.
During filing the income tax return, ABM is
harassed by the department officials for
corruption
SWOT Analysis
Strengths
Established name in the field of Information
Technology since 1983
Registered with the Pakistan software export
board (PSEB) to which helps ABM to avail tax
benefits
Good reputation among the corporate
customers

Weaknesses
High cost structures
Lack of key distribution channels
Lack of after sale services departments
Opportunities:
Removal of International barrier trade
Arrival of new technologies
Loosening of tax regulations by the Govt


Threats
Emergence of substitute products
Shifts in customers tastes away from the firms
product
Frequent changing of tax rates
High rate of taxes on import

Conclusion
Tax policies should be bench-marked and
aligned with other successful developing
countries. There should be a gradual reduction
of taxes on imports. Instead of increasing the tax
burden on those who are already paying them,
efforts should be made to widen the tax net.
Frequent tax amnesty and money whitener
schemes should be discontinued.