Ensuring voluntary tax compliance

In the social democracies of Europe, people file tax returns on time and pay the correct amount of taxes voluntarily because they are eligible, in return, for palpable benefits. For good governance and positive outcomes, rights must be linked with responsibilities. In Pakistan, the situation is altogether different. “Prime facie,” notes an analyst, “the government is defaulting on all aspects of the relationship between the state and citizens.” Finance Minister Muhammad Aurangzeb says that the social contract between the taxpayers and the state needs to be corrected, in which the taxpayers trust the system and get rewards and services for the tax paid. But this was not possible, he explained, until the fiscal space was available and therefore the allocation for social sectors would remain sub-optimal.