Impact of Federal Government Tax Policies and Its Reforms on the Overall Economy of Pakistan

Abstract

Taxation system plays a vital role in economic growth of a country. This research discussed different tax ordinances that have been introduced and applied to taxation system of Pakistan and also the impact of various tax reforms on the economy of Pakistan from 1947 till date. We have also discussed how Pakistan is still using regressive tax system, Where Pakistan is aggressively increasing the indirect tax ratio with compare to ratio of direct tax, which will eventually lead to inflation and a lower standard of living. There are shortcomings in implying the tax policies Pakistani government have been promising due to which we still are not able to cope up with fiscal deficit every year continuously. In the recent time Pakistan is stressing towards implementing “Progressive Tax Framework”, by changing the tax mix away from income tax and toward taxes that have a lower negative impact on economic growth, such as property, wealth, inheritance, and, finally, consumption taxes. Total tax revenues in Pakistan is measured at 13.7 percent of GDP in year 2017–18,which is very low for an emerging economy. Tax administration system in Pakistan is weak, because the Federal Board of Revenue has ignored its main duty of establishing a functional organizational structure. This study will further compare GDP and tax revenue collected in different time frames under Different governments with different Tax police