Tax reforms — easier than expected

The Federal Board of Revenue’s (FBR) recent decision to block the mobile SIMs of 506,671 individuals who failed to file their tax returns for 2023 as a penalty is a controversial move that telecom operators may challenge in courts. It is yet another example of using diktat to expand the tax net and improve tax collection instead of introducing systemic reforms based on best international practices. Earlier on April 1, 2024, the FBR initiated a mandatory tax registration scheme for retailers and wholesalers in six major cities. Major commercial cities like Faisalabad, Multan, and Sialkot were conspicuously left out. The FBR gave traders one month to register by April 30. Less than 100 traders reportedly registered during April. The number of retailers/traders is estimated to be around three million in the country. Pakistan has been trying to reform the tax system for decades, but the tax-to-GDP ratio has remained low. Meanwhile, low-income developing countries have made progress, with the average tax-to-GDP ratios increasing by about 3.5 percentage points since the early 1990s to 13.8 per cent in 2020.