ISLAMABAD: The taxation has not been widely considered as civic duty in Pakistan, the World Bank said in a report issued recently.
The World Bank said that tax evasion is pervasive due to low tax morale and legal loopholes that enable high-value individuals to conceal their incomes.
Few Pakistani citizens think of themselves as taxpayers, even though they pay indirect taxes on their consumption. “Therefore, taxation is not widely considered as a civic duty and essential to finance public services.”
The report said that in turn, better-off households generally do not rely on public education or health services and have little stake in paying taxes to finance better public service provision.
At the same time, tax evasion is facilitated by legal loopholes.
The Law on Benami Transactions of 2016, which prohibits anonymous transactions, could have closed one of the major loopholes.
It has not however been implemented because secondary regulations have not been approved.
Prize bonds, a large source of domestic borrowing for the government, have hitherto been both anonymous and tax exempt, making them an instrument of choice for investing funds of unexplained origin.
Likewise, foreign remittances are tax exempt and widely used to repatriate illegally exported capital.
Low taxes on immovable property also offer opportunities for tax evasion and money laundering.