RESTRICTED

RESTRICTED
RESEARCH PAPER ON
SELF SUFFICIENT PAKISTAN
BY:
MUHAMMAD MUNIR QASIM
mmqasim@gmail.com
RESTRICTED
(i)
RESTRICTED
ACKNOWLEDGEMENT
It was a wonderful learning experience for me of doing research on a very
challenging topic. Probably no one could ever bring forward a recipe of making the
country self-sufficient. This study leads to new beginning of Countrys and my future
alike. In conformity of my oath, I considered this study as a chance of serving the
nation. The study may exceed the given words limit but due to sensitivity and objectivity
of the research, it was considered more appropriate to cover all necessary aspects of
the research for the sake of completeness. Famous Scottish Physicist J ames Clark
Maxwell said, "What is done by what is called myself is, I feel, done by something
greater than myself in me". Having done this research work, I have the same kind of
feelings. This preface provides a welcomed opportunity and chance to acknowledge the
help and assistance of people who with their intellectual insights and constructive
criticism have helped me to develop this research. I would like to express my sincere
gratitude to Directing Staff of Air War College for their valuable supervision, never-
ending support and encouragement during this process. I am thankful to Gp Capt Zafar
ul Asim, Senior DS for giving me a marvelous opportunity of presenting my original
research based work before people of high intellect at Air War College. I am extremely
thankful to Sqn Ldr Rabbia Usman Rab, DS English for her able guidance during the
course of preparation of this research paper. As the subject matter of the research
paper relates to International Relations also, I had to seek guidance from Flt Lt Zahid
Yaqoob as well on few matters. He has always been very helpful with his rich
knowledge and positive response to support me in IR related areas, covered in this
paper. Although all the research work is done by me single handedly yet it remained a
fact that able guidance of all faculty members of Air War College was a driving force for
me to complete my research work. Acknowledging their support, I am thankful to all of
them for sparing their time and sharing their rich knowledge.
RESTRICTED
(ii)
RESTRICTED
EXECUTIVE SUMMARY
1. A country of 180 million people having four seasons and all types of crops, rich in
natural resources, exporter of best brains to rest of the world and first Muslim nuclear
power is at the verge of default. Fiscal deficit of the country during 2012-13 was Rs
1.105 Trillions
1
and Rs 1.651 Trillion
2
in 2013-14. As per State Bank of Pakistan,
country is under total debts of Rs 17,355.60 billion
3
. Therefore, every Pakistani is under
debt burden of Rs 96,420/-. Budget deficits are on persistent increase due to narrow
tax base and growing expenditure. The gap is being filled through external debts at the
cost of so called war on terror and printing of more currency notes. Former is causing a
civil disobedience like situation in the country due to anti US sentiments of general
public and later is causing persistent price hike and devaluation of local currency.
2. Although tax rates were at
persistent increase during last
five years yet FBR could never
meet its targets. In a latest report
of SBP it said that Although
there has been a consistent gap
between FBRs budget targets
and actual outcomes in the last
few years, but FY13 gap of
Rs445 billion is exceptionally
high. In fact, this is more than the
cumulative shortfall of Rs349
billion during the last five years.
Weak tax generation capacity is
the fundamental economic
problem faced by Pakistan. There is an urgent need to initiate and implement
comprehensive tax reforms
4
. Comprehensive tax reforms had been done in past years
as well but results of those so called reforms as presented above are obvious. It is a
proven fact that FBR and its tax collection system is a time tested failure. .
3. Albert Einstein said Insanity is doing the same thing over and over again and
expecting different results. He further said We cannot solve our problems with the
same thinking we used when we created them. Since last 66 years we are relying on
the same old taxation system. Why cant we turn the table over and think differently.
Main idea of the research is based on introduction of new approach toward tax
collection with an aim to obviate all economic problems of Pakistan. Apparently, it
sounds weird that this research can reveal something which was beyond

1
Budget in brief (Page 48), published at http://www.finance.gov.pk/budget/Budget_in_Brief_2012_13.pdf
2
Budget in brief (Page 47), published at http://www.finance.gov.pk/budget/Budget_in_Brief_2013_14.pdf
3
Pakistans Debts and Liability Summary, published at http://www.sbp.org.pk/ecodata/Profile.pdf (Top
right figure).
4
Para 60 of monetary policy statement, November 2013 published at
http://www.sbp.org.pk/m_policy/2013/MPS-Sep-2013-Eng.pdf.
RESTRICTED
(iii)
RESTRICTED
comprehension of best brains of Pakistan but logical analysis, based on official financial
facts/figures and established economic rules will prove that self sufficiency is not far
away if intention of Government exits. The nation is capable of being self sufficient and
free of all local and foreign debts with in short span of time.
4. Through all its efforts FBR
collected Rs 1939 billion
5
Tax
revenue during FY 2012-13
against projected expenditure of
Rs 3110 billion
6
. In this research,
it will be established that Taxes
amounting Rs 16088.24 billion
per year can be collected without
levy of any of the prevailing direct
or indirect tax except the one
which will be proposed. This
amount will be sufficient to pay
off External Debts of Rs 6406
Billion
7
and Internal Debts of Rs 10950 Billion
8
with in a period of one and half years
after setting aside Budget of Rs 3985 Billion
9
per year. J ust after one and a half years of
implementation of proposed taxation system, country will be having surplus of Rs
6850.87 Billion and it will be a debt free, self sufficient country.

5
Page 5 of Year Book issued by FBR and published on
http://download1.fbr.gov.pk/Docs/2013923169417516RevenueDivisionYearbook2012-
13(20Sep13)Final.pdf
6
Page No 6 of Budget in Brief 2012-13. http://www.finance.gov.pk/budget/Budget_in_Brief_2012_13.pdf
7
As published by SBP on http://www.sbp.org.pk/ecodata/Profile.pdf
8
As published by SBP on http://www.sbp.org.pk/ecodata/Profile.pdf
9
Chapter 2, Para 2.1(a) of Budget 2013-14 published by Min of Finance on
http://finance.gov.pk/budget/Budget_in_Brief_2013_14.pdf
RESTRICTED
(iv)
RESTRICTED
GLOSSARY
Self Sufficient Survival on domestic resources without inflow of debts.
IMF International monitory fund; formed to fund the needy
countries specially to maintain favorable balance of
payment.
Balance of payment Balance between costs of imports and proceeds of
exports.
Debts Loans obtained internationally or locally.
Terms of Debts Conditions on which a loan is granted.
GDP Gross Domestic Product; a basic economic growth
indicator. It is sum total of value of all goods and
services produced by a country in a year. It is
calculated by adding incomes or expenses of country
for a particular year.
GDP =Consumption +Investments+Govt Spending +
(Exports-Imports)
Inflation Rate of increase in price level and decrease in
purchasing power.
Fiscal Year A period of one year counted for calculation of
economic indicators. Usually it is counter from J uly to
J une next year.
National Income Value of goods and services produced in a year within
country and outside of the country.
Per capita Income. National Income divided over population of the country.
FBR Federal Board of Revenue; a department established
for collection of federally administered taxes.
Direct taxes Taxes levied on income or on the base of income e.g.
Income tax, Workers welfare fund, workers profit
participation fund, capital value tax etc.
Indirect taxes Taxes which are added to cost of goods or services.
e.g. Sales tax, Excise duty and custom duties etc.
RESTRICTED
(v)
RESTRICTED
Total Tax rate Amount of taxes and contributions payable by
businesses after accounting for allowable deductions
and exemptions. It excludes withholding taxes, Value
added taxes and Services taxes.
Withholding Agent A person or company who receives tax on behalf of
Government and deposits into national treasury.
POS Machine Point of Sale machine is a modern cash register used
by shops and outlets for keeping their sale and tax
record. ePOS is Point of Sale machine connected with
tax collecting authorities database.
Electronic Funds
Transfer at Point of Sale
(EFT/POS)
EFT/POS is an online system that involves the use of
plastic cards in terminal on merchants premises and
enables customers to transfer funds instantaneously
from their bank accounts to merchant accounts when
making purchases. Commonly used in Australia and
New Zealand.
MNOs Mobile Network Operators.
ICT4D Information and Communication Technologies for
Development.
e-Money E-money means electronically, including magnetically,
stored monetary value in any device or instrument or
server as represented by a claim on the issuer, which
is issued on receipt of funds for the purpose of making
payment transactions and which is accepted as a
means of payment by persons other than the issuer.
This includes e-money stored in a device such as a
SIM card or a server and accessible via mobile,
telephone, internet or other access devices, cards, and
other similar products but excludes any electronic
means to only permit transfers to/from a deposit or
current account
10
.
Bank Account Based
e-Payment Service
It is a pre-funded electronic retail payment service that
may be offered by authorized entities to allow
customers to effect payment from pre-funded accounts.
A requirement of each Bank Account Based Payment
Service is that the aggregate balances of all customer

10
Guideline for Electronic Retail Payment services, issued by Bank of J amaica.
http://www.boj.org.jm/uploads/news/guidelines_for_electronic_retail_payments_services_-
_1_february_2013.pdf
RESTRICTED
(vi)
RESTRICTED
funds be held in Bank accounts with one or more
licensed Financial Institutions.
Telephone Banking Telebanking is a form of virtual banking that deliver
financial services through telecommunication devices.
Under this mechanism, the customer transacts
business by dialing a touch-tone telephone connected
to an automated system of the bank. This is normally
done through Automated Voice Response (AVR)
technology.
PC Banking A service used by bank account holder to access his
bank account from his PC and to make fund transfers
over a secured network.
E-Wallet It is a piece of software which resides either on web
server cell phone or smart card. Amount is loaded into
e-wallet by making real payment and used for online
shopping. On completion of a transaction, the amount
travels from payer wallet to payees wallet.
Smart Card A plastic card embedded with a chip on it to store
personal information of card holder. It can store 10
times more data than a magnetic tape embedded card.
An e-wallet can also reside in chip of smart card.
Intranet Works like internet but limited to a selected community.
Web pages on Intranet are not accessible through
Internet and vice versa.
RESTRICTED
(vii)
RESTRICTED
CONTENTS
Page No
INTRODUCTION
Background / Introduction 12
Statement of Problem 13
Under utilization of natural resources 13
Low per capita Income 13
Heavy Foreign Debts 13
Low Tax Revenues 13
Significance and Scope of research 15
Literature Review 16
Taxation in Pakistan 19
Income Tax 19
Workers Welfare Fund 19
Workers Profit participation Fund 20
Capital Value Tax (CVT) 20
General Sales Tax (GST) 20
Federal Excise Duty 20
Customs Duties 20
Per Capital Revenue and Expenditure 20
Self Sufficiency Recipe 22
Integration of Mobile networks and banks 23
Integration of Banks with State Bank of Pakistan 25
Connectivity of State Bank Of Pakistan 27
Connectivity of NADRA Database 28
e-Taxation System 30
e-Tax Regime in Pakistan 32
Step 1: Legislation for e-Tax and Electronic Retail
Payment Services
32
Step 2: National Intranet 32
Step 3: Uniform Banking Systems 33
Step 4: Linking of NADRA Database with SBP 33
Step 5: Opening of Bank Accounts 33
Step 6: Linking of MNOs with SBP Database 33
Step 7: Remote operation of Bank Accounts 34
Step 8: Replacement of CNICs with Smart Cards 34
Step 9: Inflow of Black and laundered money in the
system
34
Step 10: Launching of web portals / pages on Intranet 35
Step 11: Induction of Cash Coupons 35
Step 12: Alteration of ATMs (Hardware and Software) 36
Step 13: Provision of coupon readers and Smart Card
Readers
36
Step 14: Discontinuation of paper money and coins 37
e-Tax Regime in action 37
RESTRICTED
(viii)
RESTRICTED
e-Tax System : Revenue Expectations 38
Per Capital Income approach 38
Money in Circulation Approach 39
Comparison of expected revenues and liabilities 39
Benefits of e-Tax system 40
Heavy Tax Revenues 40
Ease of Compliance 40
Correct calculation of National Income 40
Decline in general price level 40
Boom in business and employment 40
Equality 41
Revival of banking sector 41
Recovery of utility bills 41
Recommendations 42
Conclusion 44
RESTRICTED
1
RESTRICTED
INTRODUCTION
1. Pakistan has never been self sufficient since its inception. This was not due to
the reason that Pakistan was not having sufficient recourses. Pakistan was and is
having enough resources required to exist like an honorable self sufficient country.
Unfortunately the country was trapped in to vicious circle of debts mainly by the western
countries and IMF due to their malicious intentions of imposing their agenda in the
name of so called terms of debts. This external phenomenon was strengthened by
internal incapability, corruption and disloyalty of ruling elite of Pakistan. Resultantly the
country kept on depending on external and internal debts over period of few decades.
The stage has come where the country is not able to pay off even interest on debts of
existing loans yet fresh loans are in pipeline. As per Eatzaz Ahmed
11
The current
state of Pakistans economy is characterized by low gross domestic product (GDP)
growth, high inflation, lack of investment, economic mismanagement, especially in the
energy sector and continuing corruption. Although the views of Mr Eatzaz Ahmed were
published in 2011 yet they are valid as of today because, the country is persistently
facing economic decay. As per economic survey of Pakistan for fiscal year 2012-13
published on 11 J une 2013, Pakistan will be under debt of Rs 14 trillion by the end of
this fiscal year. Dividing over population of 180 million, it comes to Rs 77,777/- per
head. Per head debt share was Rs 57,000/- in 2011
12
. It is worth-mentioning that as per
public debt limitation act (an act passed by the parliament), Pakistan cannot keep debts
more that 60% of its GDP. By the end of March 2013 this percentage was 59.5% and it
will be 62% by the end of current fiscal year
13
.
2. Besides, Pakistan is facing many problems. Commonly discussed and
highlighted problems include Poverty, Illiteracy, Corruption, Unemployment, insufficient
health facilities, Power crises, War on terrorism, Declining exports, Inflation, Tumbling
stock-market, Lack of tourism and Losses in business sector. Every economist,
politician or analyst closes his article, speech and column / talk show with more or less
the same bottom line that we should alleviate the poverty; we should improve the
literacy rate; we should stop the corruption; we should create more jobs; we should
build more hospitals; we should produce power; we should deal with terrorism; we
should boost the business sector etc. If we analyze, none of these golden wishes can
be fulfilled without necessarily required funds. The main source of funds generation is
taxes. All types of direct and indirect taxes rates have been increased but no
considerable positive change is observed in the economy. When conventional methods
fail, something unconventional is direly needed to be done to obtain ground breaking
results. The research deals apparently with only one problem; generation of surplus
funds but actually it will deal with all the problems mentioned in this paragraph.

11
Professor of Economics and Dean of the Faculty of Social Sciences, Quid-i-Azam University,
Islamabad (The Lahore journal of Economics, September 2011).
12
Tribune 2 Feb, 2011.
13
Tribune 12 J un 2013.
RESTRICTED
2
RESTRICTED
STATEMENT OF PROBLEM
3. The statement of problems is 27
th
biggest economy of the world and only
nuclear power in Muslim world is on the verge of default; how Pakistan can be made
self sufficient? The research comprises provision of solution to all economic problems
of Pakistan. Major challenges being faced by Pakistans economy are the main target
of the research. It is a long list; however some important economic problems of
Pakistan are listed below:
(a) Under utilization of Natural Resources:- Natural resources include
water, coal, gas, oil, precious stones and precious mettles etc which are in ample
quantity in Pakistan but could not be exploited due to lack of funds. 23% of total
land is uncultivated. Water is being wasted due to lack of dams. No dam is
constructed after tarbela in1974. The 6th largest mine of Platinum and gold in
Rekodic Baluchistan is still waiting for enough funding in its exploration. Easy
way of Iran Gas pipeline is adopted leaving behind the recent discoveries of huge
gas reserves in Sindh and oil reserves in KPK.
(b) Low per capita income:- Per capita income is calculated by dividing
national income over population. Low per capita income means low capacity to
save. Low capacity to save means low power of investment. Investments have
declined from 22.5 percent of GDP in 2006-07 to 13.4 per cent of GDP in 2010-
11 which is a vital indicator of declining per capita income. Less investment
amounts to less development. This is how the per capita income directly relates
to development and economic growth.
(c) Heavy foreign debts:- Due to insufficient domestic resources to meet
the fiscal requirements, Pakistan has to rely on foreign debts. Persistent inflow
of foreign debts has accumulated such a big amount of foreign debts that most of
the domestic resources are being used just for debt servicing. As per State Bank
of Pakistan
14
, Pakistans foreign debts obtained from IMF alone are 441.3 Billion
rupees (4.11 billion dollars). Total external debs are 6159.70 Billion rupees
(57.30 billion dollars)
15
. Pakistans debt servicing obligations on external debt
rose to $3.553 billion in the current fiscal year, up by 54 percent over $2.3 billion
the previous year
16
. After debt servicing, a meager amount generated from local
resources rests for development and well being of the country.
(d) Low Tax revenues:- FBR set the target of tax collection for fiscal year
2012-13 to the tune of Rs 2381 billion but in first four month they were able

14
Figure at I(C)(c) in SBP report published at http://www.sbp.org.pk/ecodata/Profile.pdf
15
Figure at I(C) in SBP report published at http://www.sbp.org.pk/ecodata/Profile.pdf.
16
Economic Affairs Divisions presentation (covered by business recorder)
http://www.brecorder.com/market-data/stocks-a-bonds/0/1147985/
RESTRICTED
3
RESTRICTED
collect only Rs 549 billion against target of Rs 613 billion
17
. Considering four
month short fall of Rs 64 billion as a yardstick it is expected that by the end of
current financial year FBR will be collecting Rs 192 billion less than the target.
Even if the target is met, the target tax revenue for FY 2013-14 of Rs 2124
billion
18
will be insufficient to meet projected expenditure of Rs 3478
19
billion for
the same financial year. Tax evasion is an other problem directly related to low
tax revenues. Businessmen are maintaining dual books of accounts as a
general practice. In addition they are being paid false tax credit claims though
bribing the tax officials. Politicians are not paying their due taxes. 43% of the
members of national assembly have not paid tax during FY 2011-12.
4. As earlier mentioned in this document, there are number of economic challenges
being faced by Pakistan, only few of them are discussed above. Unemployment,
adverse balance of payment, trade deficits, Inflation, power crises, poverty and so
many other problems are not discussed here because solution presented in the
research will deal with all types of economic problem alike.

17
Qarterly report of Fedral Board of Revenue (http://www.nation.com.pk/business/12-Sep-2012/rs-2-38tr-
target-challenging-fbr)
18
Page 3, Tax in Brief 2013-14, http://www.finance.gov.pk/budget/Budget_in_Brief_2013_14.pdf
19
Page 2, Tax in Brief 2013-14, http://www.finance.gov.pk/budget/Budget_in_Brief_2013_14.pdf
RESTRICTED
4
RESTRICTED
SIGNIFICANCE AND SCOPE OF RESEARCH
5. The problem statement highlighted severity of the matter. It is rightly said that
every problem has a solution. But, what is the significance of finding solution to the
posed problem statement? Undoubtedly, it is a matter of survival of Pakistan. It is a
matter of honorable living and well being of 180 million people of Pakistan. Every
article in newspapers, every TV talk show, every seminar and symposium is focused on
one and the same point that how Pakistan can live like an independent, honorable and
self sufficient country. People of great intellect have written a lot in this respect. An
article titled as The only way out by Huzaima Bukhari and Dr Ikramul Haq
20
suggests
that the only way out to strengthen the economy is bringing non-tax payers in tax net.
It is said by State Bank of Pakistan in Monetary policy statement published in
September 2013 that Weak tax generation capacity is the fundamental economic
problem faced by Pakistan. There is an urgent need to initiate and implement
comprehensive tax reforms
21
. Member inland revenue, FBR Mr Muhammad Ashraf
Khan said in a press statement that "the real challenge confronted by the country is to
revamp the tax system to survive as a successful nation". Spokesman of Department
for international Development (DfiD) UK said in connection with provision of aid to
Pakistan We have made it clear to government and opposition politicians in Pakistan
that it is not sustainable for British taxpayers to fund development spend if Pakistan is
not building up its own stable tax take
22
. These are just few examples, quoted here to
establish significance of the matter. There are thousands of wishful sentences in
suggestive tone but a concrete and doable solution is yet awaited. It is surprising that
bureaucracy and ruling elite of the country are good and bad financial managers at the
same time; good for themselves and bad for the country. After every term of 5 years
their personal assets are found manifolds inflated and national treasury found empty.
They make sure that their personal interest are not compromised at any cost and at the
same time they just give wishful statements about the country that we should do this
and we should do that.
6. Significance of economic independence, self sufficiency, being debt free and
being a welfare state is something which is easily understood by every man of common
prudence. Considering other side of the picture, the consequence of a sovereign
default should be understood. Willful or uncontrolled inability of any country to pay of
its international liabilities or to abide by the terms thereon is termed as sovereign
default. It means permanent disqualification for further international debts, cutting down
of budget including defence budget, collapse of banking sector due to mistrust of
general public and withdrawal of their savings at once, full stop on development
expenditure etc. It is horrific to think for a nation which has learnt to live lavishly on
others money to live in a defaulted country. Therefore, it is a matter of great
significance to make Pakistan a self sufficient and debt free country.

20
Both are professors at LUMS Lahore and running a Tax Law Consultancy
http://www.huzaimaikram.com.
21
Para 60 of monetary policy statement, November 2013 published at
http://www.sbp.org.pk/m_policy/2013/MPS-Sep-2013-Eng.pdf
22
A news by BBC news on 4 April 2013
RESTRICTED
5
RESTRICTED
LITRATURE REVIEW
7. Main target of the research is about finding ways and means to bring whole
population of Pakistan in tax net at very nominal tax rate. It is about increasing the tax
base from 0.81million
23
tax payers to 180 million tax payers. Without use of latest
network and information technology, this goal cannot be achieved. Literature review on
any topic demands exploration of previously done work on same or similar lines. So far
no country in the world has ensured collection of tax from 100% of its population yet lot
of work has been done on automation of tax returns and easing up the taxation
procedures. Measures taken by modern economies and their outcomes in this regard
can source of guideline for this research.
8. Paying Taxes is an annual study carried out by Word Bank and International
Finance Corporation UK. The study comprises of comparison of taxation systems
effectiveness of 189 economies of the world on the basis of three parameters. These
are; Total Tax Rate (TTR), Time to comply (ease of tax payment) and No of tax
payments per year. Latest annual report of 2014
24
reveals that Guatemala made the
biggest improvement in the ease of paying taxes in the past year. The most common
feature of tax reforms in the past five years was to reduce profit tax rates (Income Tax)
to improve the tax compliance. In the past three years more economies focused on
introducing or improving electronic systems. Since 2009, 189 tax reforms in 114
economies were recorded. Of these, 57 introduced or enhanced online filing systems.
By 2012, 76 economies had fully implemented electronic filing and payment of taxes
25
.
In 2012-13, electronic systems became more popular among taxpayers in Kenya,
Madagascar, Rwanda and Uganda. In Latin America and the Caribbean, economies
including Colombia, Guatemala, Mexico, Paraguay and Uruguay have implemented
electronic systems for filing and paying taxes over the past five years. In East Asia and
the Pacific 7 of 25 economies have established electronic systems for filing and paying
taxes: Taiwan, China; and Thailand. In Middle East 5 out of 20 economies have
implemented electronic systems for submitting tax declarations and paying taxes.
These include Morocco, Saudi Arabia and the United Arab Emirates. Report further
says that in South Asia, India is the only economy out of eight others which is having a
complete online system for filing and paying taxes. Pakistan also has established
electronic system but uptake has been limited.
9. Above paragraph presents the position of Pakistan among economies of the
world with respect to tax automation. Ranking of Pakistan in this regard is 166 out of
189 economies of the world
26
with 577 hours per year to comply tax obligations
27
and

23
Daily DAWN 20 Dec 2012, State finance minister said that 3.39 million people are issued with NTN but
only 0.81 million people filed their tax returns in 2011-12.
24
http://www.pwc.com/gx/en/paying-taxes/assets/pwc-paying-taxes-2014.pdf. The report compiled by
Rita Ramalho, J oanna Nasr, Nina Paustian, Michelle Hanf, Valter Deperon and Nadia Novik or World
Bank and Neville Howlett, Tom Dane, Hong Wang, Karla Cortez and J ialu Pan of PwC.
25
Page 16 of the report.
26
Page 166 of the report.
27
Page 177 of the report Paying Taxes 2014.
RESTRICTED
6
RESTRICTED
34.7% total tax rate
28
. As per the report, economies of UAE, Qatar, Saudi Arabia, Hong
Kong & China and Singapore are declared having five top level systems respectively in
terms of ease, efficiency, compliance time and total tax rate. Researchers of World
Bank believe that a best taxation system is characterized with low tax rate, expanded
tax base and minimal time to comply. Taxation of world 189 economies is averaged at
maintaining Total tax rate of 43.1%, 268 hours in a year to comply with the tax laws (tax
payment man hours) and 26.7 tax payments per year
29
. If this is the outcome of the
latest taxation systems of most modern economies of the world, we need to think again.
Thinking of zero man hours required for complying tax payments, Tax rate of 2%
instead of 43.1% and filing of zero tax returns in a year can be a more than ideal
situation and undoubtedly best of the best technologies of the world, when compared on
the basis of three dimensions set by researchers of the World Bank.
10. UAE is declared having best taxation system in the world. On average a medium
company in the Middle East makes 17.6 payments (frequency with which the company
has to file and pay different types of taxes and contributions), and spending 158 hours
(time to prepare, file and pay three major types of taxes including labour taxes,
mandatory contributions and consumption taxes), a figure which is well below the world
average and the lowest for any region. Let us analyze, what made UAE to hold top
position in the world for its taxation system. In UAE there are no Personal income,
Capital gains, Value-added, Withholding and Corporate taxes. Only oil, gas and
petrochemical companies and branch office of foreign banks are required to pay taxes.
On account of personal taxes, people of UAE are liable to pay 5 to 10% service charges
on their hotels and restaurants bills. If some how Pakistan manages to levy only 2%
tax and discontinue all other direct/indirect taxes, for sure the country will stand at 1
st
position in the world. The research paper will deal with this hypothesis that how
Pakistan can manage to generate sufficient revenues to retire its debts by imposing only
a single tax @ 2%. This hard target can be achieved if whole population of the country
is brought in tax net and 2% tax is charged on each and every transaction taking place
in any corner of the country. It is about broadening the tax base to its optimum
capacity.
11. In order to impose 2% tax on each transaction, all transactions are necessarily
required to be documented. In the prevailing system, nearly all transactions remain
anonymous. Only purchase of mobile cards is linked with servers of cellular phone
operators therefore, these transactions are not anonymous. Resultantly taxes on
mobile cards are being charged with 100% accuracy. From 2010 to 2013 an amount or
Rs 91 billion is collected from mobile card users
30
. Beauty of the system is notable that
no matter a user of cell phone is a minister, a bureaucrat, a General, a gangster or a
beggar, if he has to use a mobile card, he must have to pay tax and no one is above
this mandatory binding. There are no media appeals, no complex tax returns, no
confusing and difficult tax laws, no book-keeping, no audits and no rebates with respect

28
Page 175 of the report Paying Taxes 2014.
29
Page 2 of the report; Paying Taxes 2014.
30
Business Recorder, 8 J an 2014.
RESTRICTED
7
RESTRICTED
to tax on mobile cards. You just charge a card to your cell phone and tax will be
deposited into Government treasury automatically. If this standard of transparency,
impartiality and ease in collection and payment of tax is applied on all business/non-
business transactions taking place on every second in country, the country will be for
sure in a position to collect enough revenues to pay off its all debts in a short span of
time.
12. In Pakistan one of the most common Value added taxes (VAT) is General Sales
Tax which is included in the sale price of consumer goods and is being collected
through withholding agents. In most of the cases this tax is embezzled by the
withholding agents and does not reach the Government treasury. Fidelity Bank has
installed 50 POS machines in state of Abia in Nigeria for collection of Tax direct from
point of sale to bank
31
. Recently Turkey has started installation of new machines at
outlets combining POS and cash register. The machine accepts cash as well as
credit/debit cards. 2% of sales proceeds directly go into bank account of Government
32
.
Nagpur Municipal committee of India has devised a system recently for online collection
of property tax. In every zone of the municipal committee, machines are installed to
accept cash, debt and credit cards for collection of property tax. Payee is
acknowledged with SMS about receipt of tax. In this literature review it is established
that ease in tax deposit, reduction of tax rates and broadening of tax base are the best
strategies for maximization of tax revenues. Further, it is also established that world is
now adopting new ways of tax collection like tax collection through ePOS machines,
mobile phones and online payments. The research will be focused on possibilities of
broadening of tax base at a minimal rate of tax and online collection of taxes in
Pakistan.

31
http://www.thisdaylive.com/articles/fidelity-bank-boosts-abia-s-igr-drive-with-50-pos-machines/162358/
32
http://www.hurriyetdailynews.com/new-payment-system-to-earn-extra-tax-
revenue.aspx?pageID=238&nID=49601&NewsCatID=344
RESTRICTED
8
RESTRICTED
TAXATION IN PAKISTAN
13. Broadly, there are two types of federal taxes; Direct taxes and Indirect Taxes.
(a) Direct Taxes. These are those taxes whose incidence is borne by the
person from whomthe taxes are collected. Following direct taxes are in place in
Pakistan.
(i) Income Tax. It is payable by every person with regard to his
taxable income for a particular tax year under Net Income Bases (NIB) or
Final Tax Regime (FTR). Under NIB, tax is payable after realization of
profit at the end of year. Losses are not taxed and can be carried forward
for future adjustments. Every tax payer under this system has to file a
detailed tax return yearly. Companies are to attach audited accounts as
well. Under Final or Flat Tax Regime tax is charged on gross
receipts/turnover for the year, irrespective of profit or loss. It was
introduced in 1991. Rates are presented below.
INCOME TAX RATES UNDER NET IMCOME BASIS (NIB)
INCOME TAX RATES UNDER FINAL TAX REGIME (FTR)
(ii) Workers Welfare Fund. This tax is collected by FBR under
workers welfare fund ordinance 1971 from companies and businesses
having yearly income more than 500000 @ 2% of income. The fund is
used for housing, medical and general facilitation of industrial workers.
RESTRICTED
9
RESTRICTED
PER CAPITAL REVENUE AND EXPENDITURE
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1
9
8
1
1
9
8
2
1
9
8
3
1
9
8
4
1
9
8
5
1
9
8
6
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
YEARS
RS
PER CAPITA REVENUE PER CAPITA EXPENDITURE
(iii) Workers Profit Participation Fund. Under companys profit
(Workers participation) Act 1968, 5% of income is to be contributed by
companies having 50 or more employees with certain limits of paid up
capital and assets.
(iv) Capital Value Tax (CVT). As per Finance Act, 2006, CVT is
levied @2% of recorded value of one kanal or above residential property
and any size of commercial property.
(b) Indirect Taxes. These Taxes are added to the cost of goods or services
and ultimately borne by the consumers. Following indirect taxes are levied in
Pakistan:
(i) General Sales Tax (GST). GST is charged at the rate of 16% to
19% to Manufacturers, Retailers, Importers and Wholesalers. It simply
increases the price of consumer goods which is borne by consumers.
(ii) Federal Excise Duty. It is levied on domestically produces goods,
imports and services rendered in the country. Purpose of FED is to
encourage/discourage use of certain commodities and services.
(iii) Customs Duties. These are levied on imports only to regulate the
inflow of certain goods. Customs duties include Import duties, Warehouse
surcharge, Export Development Surcharge and Miscellaneous.
RESTRICTED
10
RESTRICTED
14. A quick rundown of different direct and indirect taxes in force is presented above
to make a point that so many different kinds of taxes are in place yet the total revenue
collected from all these taxes is quite discouraging. Over a period of time the per
capita excess of expenses over revenue gap has been persistently widening.
33
In the
above graph, data from 1981 to 2010 is plotted just to show a trend of efficiency of tax
system of Pakistan which is glaringly going into decay. Therefore it is established that
no matter how many new taxes are introduced, how many new tax laws are made and
how many procedures are adopted to get the tax law abided by the tax payers, the
existing tax system is a proven time tested failure and cannot rescue Pakistan toward
self sufficiency. It is now high time for Pakistan that international donors have also
started expressing their concerns regarding inefficiency of tax system of Pakistan and
increasing culture of tax evasion in the country. UKs Department of International
Development (DfiD) expressed that Pakistan needs to recoup more in taxes before any
aid boost. Further, it was said we cannot expect people in the UK to pay taxes to
improve education and health in Pakistan if the Pakistani elite does not pay meaningful
amounts of income tax."
34

33
Adapted from a research paper of Mr Tahir Sadiq (Lecturer in Department of Economics at Beacon
house National University, Lahore) http://www.pide.org.pk/psde/25/pdf/agm26/day2/Tahir%20Sadiq.pdf
34
Story covered by The Guardian http://www.theguardian.com/global-
development/2013/apr/04/pakistan-recoup-taxes-aid-mps
RESTRICTED
11
RESTRICTED
SELF SUFFICIENCY RECIPE
15. Self sufficiency or self reliance is termed as survival and progress of country
without any external aid, assistance or loans. This can be achieved through collection
and generation of enough funds locally to payoff external/internal debts and to meet the
projected national expenditure. At present the country is under burden of Rs 6405.80
billion external and Rs 10949.80 billion internal debts (total Debts are Rs 17355.60
billion). Annual budget as per budget figure of FY2013-14 is of Rs 3985 billion. It
means, we need to have Rs 21340.60 billion to reach the level of self sufficiency. Total
internal resources of the country (including all tax revenues, revenue receipts, capital
receipts and provincial surplus) are amounting to Rs 2434 billion
35
which is only 11.41%
of total requirement and 61.08% of budgetary requirement of FY2013-14. If we forget
about debts, still we need to have Rs 1551 billion more to fill the budgetary gap. The
deficient amount is being arranged through internal and external debts every year,
therefore, debts are persistently increasing over period of time. Thinking optimistically,
if we manage to strengthen existing tax system to such a level that it should be capable
of meeting 100% budgetary requirements, yet we wont be able to retire out internal and
external obligations which are piling up since inception of the country. It is therefore
established that what ever we may do with the existing system of taxation for its
improvement and enforcement, we cannot be self sufficient. There is no way out
except to introduce a new taxation system because when there is no space for further
patch work on a sheet, it is always replaced with a new one.
16. Presently, registered taxpayers are 1.88% of total population of the country, of
which only 0.45% has deposited their tax returns last year (Footnote 22 referred). This
is the weak area as well as the key to solution of the problem. We need to bring 100%
of population in tax net which could not be done in past mainly due to anonymity of the
transactions. When a transaction takes place in any corner of the country it is not in
knowledge of Government. Every second, millions of financial transactions are taking
place in the country. Even if each and every transaction is reported, the Government is
not in position to collect tax on each transaction in the absence of an automated
system. This gigantic task cannot be done without a sophisticated automated
computerized system. Earlier in this paper, example of tax on mobile cards is quoted.
Those transactions are not anonymous, they are linked with mobile operators and
banking servers, therefore, the tax is being collected without any problem. Modern
word is finding ways to overcome anonymity of the transactions. Fidelity Bank has
installed 50 POS machines in state of Abia in Nigeria for collection of Tax direct from
point of sale to bank
36
. Similar systems are being installed by most of modern
economies.
17. Pakistan is considered lucky for tax automation because infrastructure required
for the purpose is already available in the country. It only needs will of Government to
do it, otherwise only few administrative arrangements will be required to achieve the

35
Page 8 of Budget 2013-14, http://finance.gov.pk/budget/Budget_in_Brief_2013_14.pdf
36
http://www.thisdaylive.com/articles/fidelity-bank-boosts-abia-s-igr-drive-with-50-pos-machines/162358/
RESTRICTED
12
RESTRICTED
desired goal. Analysis of components necessarily required for tax automation in
Pakistan is presented in succeeding paragraphs.
Integration of Mobile networks and Banks
18 There are four Mobile Network Operators (MNOs) in Pakistan; Mobilink, Telenor,
Ufone, Warid and Zong. Servers of all four mobile networks will be required to link with
database of State Bank of Pakistan. The MNOs are already in process of linking
themselves with different commercial banks. They are offering financial services in
collaboration with different banks. Telenor Easypaisa, UBL Omni, Ufone Upayments
and MCB Mobile are fast growing mobile financial services in the country.
(a) Mobilink offers MobiCash money transfer service, SMS (text) banking to
Citibank, MCB, Standard Chartered Bank, UBL and Emirates Global Islamic
Bank (EGIB) account holders.
(b) Telenor provides EasyPaisa service, primarily aimed at assisting the un-
banked population by allowing them to use their mobile phone numbers as
account identifiers. An other service Easypaisa Khushaal; is introduced by
Telenor to provide a savings product, offering rewards with free Life and
Accidental Death Insurance. Fauri Ticket service is also one of its kind,
introduced by Telenor in collaboration with PIA to buy a ticket by calling UAN
111-786-786 and making payment at any easyPaisa centre.
(c) Ufone Upayments is offered by Ufone in collaboration with HBL and
Summit Bank. Customers can inquire about and pay utility bills, buy and pay for
prepaid and postpaid airtime purchases, check HBL or Summit Bank account
statements, and transfer money to any bank account in the Habib Bank and
Summit Bank networks.
(d) Zong provides TimePay service for transfer to money to any CNIC holder
irrespective of the fact the recipient in a zong customer or he is not having any
bank account.
(e) UBL Omni customers can withdraw and deposit cash, make utility bill
payments, transfer money domestically and internationally, pay mobile phone
and other bills, and purchase airtime. Recently, UBL also introduced an ATM
card for its Omni customers to receive money through ATMs.
(f) MCB customers can check their bank-account balances, receive mini-
statements, transfer funds, purchase mobile top-ups, pay mobile phone and
utility bills, make MCB Visa credit-card payments or charitable donations, or buy
insurance.
(g) On 29 April 2013, HBL Express branchless banking service was launched
in Karachi. It was expressed in the ceremony that HBL Express will be launched
RESTRICTED
13
RESTRICTED
with Domestic Remittances and Utility Bill Payments. The product portfolio will
be expanded to include International Remittances, Mobile Wallets, G2P
Payments and Corporate Solutions in the near future. To allow its agents to
conduct transactions, HBL Express has pioneered in providing its agents with
Smart phones equipped with a custom developed mobile application
37
.
19. A USA based organization Inter Media Knowledge Centre
38
has revealed
interesting facts about mobile usage and mobile financial services in Pakistan.
(a) 50% of population of Pakistan is illiterate yet 90% of it is having access to
mobile phone and Sim Card.
(b) 10% of population is having bank accounts.
(c) 5% house holds use m-money.

37
Page 8 of Branchless Banking newsletter of State Bank of Pakistan.
http://www.sbp.org.pk/publications/acd/BranchlessBanking-J an-Mar-2013.pdf
38
InterMedia is currently working with the Bill & Melinda Gates Foundations Financial Services
http://www.audiencescapes.org/fits
RESTRICTED
14
RESTRICTED
Integration of Banks with State Bank of Pakistan.
20. The State Bank of Pakistan is the Central Bank of Pakistan, operating since 1
st
J uly 1948. State Bank is not only responsible for issuing domestic currency and
regulating foreign currency but also for analyzing domestic economy. The bank has
been operating with a mission of promoting both monetary and financial stability and to
promote the financial system for achieving sustainable growth by reducing inequality.
The relevant provisions of law which vest powers in State Bank of Pakistan to carry out
inspection of banks are contained in the Banking Companies Ordinance, 1962.
Besides, State Bank of Pakistan Act, 1956 and the Banks Nationalization Act, 1974, the
Financial Institutions (Recovery of finance) Ordinance, 2001, companies Ordinance,
1984 and Statutory Regulatory Orders (SROs) are the relevant legislations, which cover
the activities concerning the banking sector.
21. As per SBP
39
, commercial banks of Pakistan include De-Nationalized Banks
(DNBs), Development Financial Institutions (DFIs), Foreign Banks (FBs), Investment
Banks (IBs), Micro Finance Banks (MFBs), Nationalized Commercial banks (NCBs),
Private Scheduled Banks (PScBs), Provincial Banks (PBs) and Specialized Schedule
Banks(SSBs). Under the powers conferred by above mentioned laws, State Bank is
officially authorized to access data and monitor DFIs, and MFBs. There are 8 DFIs and
2 MFBs in Pakistan working under supervision of State Bank of Pakistan. The other
banks include 4 Nationalized Banks, 2 De-nationalized Banks, 04 Specialized
Scheduled Banks, 13 Private Banks, 2 provincial banks, 2 Micro Finance Banks, 14
Investment Banks, 2 Venture Capital, 4 Discount Houses and 4 Housing & Finance
Companies. Names of banks in different categories are presented below.
(a) Nationalized Banks.
(i) First Women Bank
(ii) Habib Bank Limited
(iii) National Bank of Pakistan
(iv) United Bank Limited
(b) De-Nationalized Banks.
(i) Allied Bank of Pakistan
(ii) Muslim Commercial Bank Ltd
(c) Specialized Scheduled Banks.
(i) Agricultural Development Bank
(ii) Federal Bank for Co-operatives
(iii) Industrial Development Bank
(iv) Punjab Provincial co-operative Bank

39
State Bank of Pakistan official Web http://sbp.org.pk/f_links/index.asp
RESTRICTED
15
RESTRICTED
(d) Private Scheduled Banks.
(i) Askari Commercial Bank Ltd
(ii) Bank Al Falah Ltd
(iii) Bank Al Habib Ltd
(iv) Summit Bank Ltd
(v) Faysal Bank Ltd
(vi) Meezan Bank Ltd
(vii) Habib Metropolitan Bank Ltd
(viii) NIB Bank Ltd
(ix) KASB Bank Ltd
(x) Soneri Bank Ltd
(xi) Standard Chartered Bank Ltd
(xii) SAMBA Bank Ltd
(xiii) Silk Bank Ltd
(e) Provincial Banks.
(i) The Bank of Khyber
(ii) The Bank of Punjab
(f) Micro Finance Banks.
(i) The First Micro Finance Bank Ltd
(ii) Khushhali Bank Ltd
(g) Development Financial Institutions.
(i) Investment Corporation of Pakistan
(ii) National Investment Trust Ltd
(iii) Pak Kuwait Investment Company (Pvt) Ltd
(iv) Pak Libya Holding Company (Pvt) Ltd
(v) Pak Oman Investment Company (Pvt) Ltd
(vi) Pakistan Industrial Credit & Investment Ltd
(vii) Saudi Pak Industrial & Agricultural Investment Company (Pvt) Ltd
(viii) SME Bank Ltd
(h) Investment Banks.
(i) First Standard Investment Bank Ltd
(ii) ABL Asset Investment Bank Ltd
(iii) Atlas Investment Bank Ltd
(iv) Crescent Investment Bank Ltd
(v) Escorts Investment Bank Ltd
(vi) Fidelity Investment Bank Ltd
RESTRICTED
16
RESTRICTED
(vii) First International Investment Bank Ltd
(viii) Franklin Investment Bank Ltd
(ix) Islamic Investment Bank Ltd
(x) J ehangir Siddiqui Investment Bank Ltd
(xi) Orix Investment Bank (Pak) Ltd
(xii) Prudential Investment Bank Ltd
(xiii) Security Investment Bank Ltd
(xiv) Trust Investment Bank Ltd
(j) Venture Capitals.
(i) Pakistan Venture Capital Ltd
(ii) Pak Emerging Venture Ltd
(k) Discount Houses.
(i) First Credit & Discount Corporation (Pvt) Ltd
(ii) National Discounting Services Ltd
(iii) Prudential Discount & Guarantee House Ltd
(iv) Speedway Fond metal (Pak) Ltd
(l) Housing Finance Companies.
(i) Asian Housing Finance Ltd
(ii) Citibank Housing Finance Co Ltd
(iii) House Building Finance Corporation
(iv) International Housing Finance Ltd
22. There are roughly 61 banks and financial institutions which will be required to
link with database of Sate Bank of Pakistan. SBP will communicate only with head
office of each bank. Individual branches of all banks are already connected with
concerned head offices.
Connectivity of State Bank Of Pakistan
23. Nearly half of the work is already done at SBP for establishing an online link with
financial institutions. In year 2000, State Bank of Pakistan started a project with the
help of World Bank under Technical Assistance for Banking Sector (TABS) program
for linking and automation of SBP head office and its distantly located 15 branch offices.
state of the art Oracle financial based ERP software named as Globus was installed
alongwith a data warehousing facility. In order to implement the system, 1000 PCs,
three N-Class application servers and two N-Class backup servers were installed. A
high speed Gigabit backbone connection was installed to keep distant backup of
RESTRICTED
17
RESTRICTED
precious data.
40
In the availability of mentioned infrastructure at SBP, it will be not a big
task to hook up head offices of commercial banks with backbone of SBP because head
officers of most of the banks are located in same city of Karachi.
Connectivity of NADRA Database
24. National Database & Registration Authority (NADRA) started its operation in
March 2000. Through continuous efforts and struggle now NADRA can pride itself for
having one of the largest centralized databases in the world. It is maintaining multi
record data of 96 million people of Pakistan. Using its magnificent database, NADRA is
providing following services besides issuance of computerized National Identity Cards
and e-passports.
(a) SMS service in collaboration with Pakistan Telecommunication Authority
and all mobile networks for issuance of Pakistan Cards. Any CNIC can be
verified within no time by sending an SMS on 9777.
(b) About 90 Data centralization projects are on way to link information about
a person available at any departments across the country.
(c) NADRA Smart Cards project is started to issue chip-CNICs containing
multiple security features, biometric identification record, all CNIC based
information and will be extended to addition of data of all Credit/Debit cards in the
same chip. It is expected that Smart Cards will be usable at ATM machines as
well in near future.
(d) Through its more than 5000 e-sahulat centers, NADRA is providing
services for collection of all kinds of utility bills and some other allied services.
(e) e-Driving license which can also record the detail of violations in chip and
NADRA database.
(f) During recent vote verification issue, NADRA under command of Mr Tariq
Malik invented Electronic Voting Machine
41
to cast votes electronically after
biometric verification of each voter. The EVM was enabled to compile results
and to upload voting data on NADRA database. It was a heinous crime for which
his services were terminated on the day when he was going to present his
invention before election commission of Pakistan.

40
As per Technology up gradation report by State Bank of Pakistan
http://www.sbp.org.pk/publications/apr/Technology_Upgradation.pdf
41
http://www.nadra.gov.pk/index.php/component/content/article/14-latest-news/495-nadra-develops-
electronic-voting-machine-
RESTRICTED
18
RESTRICTED
25. Banks, Mobile Network Operators and NADRA are three main players who can
jointly be a part of a computerized economic/taxation system which can make Pakistan
self sufficient. Existing infrastructure, capabilities and services of main players are
evaluated before proposing the system.
RESTRICTED
19
RESTRICTED
e-TAXATION SYSTEM
26. ICT4D is a newly emerged concept which deals
with use of Information and Communication
Technologies for Development. It covers nearly all
areas of life and Taxation is no exception to it. The
concept of e-governance is already embraced by
Pakistan and various online services are being
provided through official portal of Government of
Pakistan
42
. Limited e-services are provided being
provided by Federal Board of Revenue thorough its
web portal
43
but efforts for maximization of tax revenue
through implementation of ICT are yet to be seen. FBR
is providing Online Taxpayer Registration, Get User ID / Password / PIN, Online NTN
Inquiry, Active Taxpayer List, Black Listed Taxpayers and Document Verifications
services online. In its broad prospective, Government of Pakistan is just reproducing
the offline information online but the major problem is not being addressed which are
low tax revenues, tax evasion, corruption etc. Modern world has adopted some new
technologies to address similar issues in their countries. J amaica has introduced an
online tax
payment
system
44
. The
system was
introduced in year
2007 and got
popularity in days
due to ease in
compliance and
economy of
efforts. A report
was presented by
Fiscal Services
Limited
45
in this
regard which
claimed that tax
revenues
rocketed upward soon after implementation of online tax payment system in J amaica.
The Fiscal Services Limited J amaica is contractor of J amaican Government for
provision and maintenance of e-Governance services. Pakistan is again having an
edge in this regard because similar services are already available with NADRA
Pakistan. Government may need not to outsource in this regards, neither is it

42
Official Portal of Government of Pakistan. http://www.pakistan.gov.pk
43
Official Web Portal of FBR http://www.fbr.gov.pk
44
J amaicas online Tax Payment services https://www.jamaicatax-online.gov
45
http://www.fsl.org.jm
RESTRICTED
20
RESTRICTED
recommended due to sensitivity of financial data. After implementation of online tax
payment system in J amaica visible increase in revenue was noted, as shown in this
graph.
27. Similar approach is being followed by most of the modern economies. Pakistan,
having culture of corruption and tax evasion need not only to collect tax online but also
need to ensure visibility and transparency of financial transactions taking place in the
country. At 3
rd
international conference of e-Governance held in 2005, during his
presentation, Mr Asif Kabani
46
proposed Government to implement online transactions
system. In the next segment of this paper, it will be explored that how anonymous
financial transaction can be made visible and how tax can be collected with maximum
ease and accuracy without filing unmanageable/troublesome tax returns. After going
through the technological tax measures being taken in the worlds modern economies, it
is envisaged that Pakistan can achieve the level of self sufficiency only and only by
implementing a mega project. As there is no further room for patch work to correct the
existing tax adversities, therefore the existing tax system need to be replaced with a
new e-Tax system by taking few big and bold economic/administrative steps.

46
Deputy Director, Decentralization Support Program, NPSO Asian Development Bank & Ministry of
Finance. http://www.slideshare.net/kabani/managing-e-governance-in-pakistan
RESTRICTED
21
RESTRICTED
NADRA Server SBP Server
e-TAX REGIME IN PAKISTAN
Step 1: Legislation for e-Tax and Electronic Retail Payment Services
28. Electronic Retail Payment system is a system which provides facility of various
electronic ways to consumers for making payments. It is not limited to but includes e-
payments through web, Credit card, Debit Card, Smart card or electronic wallet. Incase
of payments through electronic wallet or hard cash the transaction remain anonymous
and untraceable by tax authorities. Due to presence of anonymity element in financial
transactions, taxes cannot be collected accurately. To start with, in order to overcome
anonymity of financial transactions, a set of rules will necessarily be required for
operation of ERPS and for collection of e-Taxes. One year back, similar rules were
made by J amaican Government
47
which are available on address given in footnote.
Under the mentioned rules, ERPS is in practice in J amaica. Riksbank (State bank of
Sweden) has also implemented electronic large value payment and electronic retail
payment systems. 70% of the population of Sweden is regular user of these systems
48
.
USA has also a state of the art electronic payment system
49
. These are few examples
of electronic payment system in practice. Sooner or later every developing economy
has to follow the footsteps of worlds modern economies. Bank Indonesia, the countrys
central bank, recently issued guiding principles for upcoming tests of a banking and
payment system through existing Financial Services Intermediary Units (FSIU),
registered third-party services which facilitate the provision of non-conventional banking
services. These principles are intended to provide banks as well as telecommunications
companies and FSIUs with a more comprehensive understanding of branchless banking
in an effort to effect adequate preparation to support project implementation of the
trials
50
. Pakistan needs also to do necessary legislation on the footsteps of Indonesia.
Step 2: National Intranet
29. Intranet is just like internet with an
exception that it is accessible by a
selected group of users, community or
country. Big organizations maintain
Intranets to provide access of their
centrally located ERP systems and web
pages to users at their distantly located
offices. Pakistan will need to establish a
country wide Intranet to provide a
connectivity back bone for access of

47
ERPS guidelines
http://www.boj.org.jm/uploads/news/guidelines_for_electronic_retail_payments_services_-
_1_february_2013.pdf
48
http://www.riksbank.se/en/Financial-stability/Financial-infrastructure/Systems-in-the-Swedish-
infrastructure/
49
USA Electronic payment system http://www.usapaymentsystems.com
50
Page 11 of Branchless Banking newsletter by State Bank of Pakistan J an-Mar 2013.
RESTRICTED
22
RESTRICTED
multiple financial, economic, e-governance and e-taxation modules to people of
Pakistan. It will be a fire walled system so that national data is not shared or accessed
by international Internet users. A switching technology will be used so that a Pakistan
based user should be able to access either Internet or the Intranet at one time, but not
the both.
Step 3: Uniform Banking Systems
30. At present different commercial banks are financial institutions are using different
software to keep the accounts of their respective clients. These programs are tailored
as per specific requirements of the banks in conciliation with their role and task. State
Bank and all commercial banks will need to develop intermediary modules to ensure
real time financial data communication among all commercial banks and State Bank of
Pakistan over intranet.
Step 4: Linking of NADRA Database with SBP
31. NADRA Database keeps record of people; it includes biometric and family tree
record also. In order to device an e-Tax system NADRA database will require to be
linked with State Bank Database. The linking will be done trough Intranet backbone
using an intermediary module. This purposeful linking will facilitate both the databases
to access desired data from each other. State Bank will require biometric record and
addresses of bank account holders and NADRA will require financial information of
people for its embedding in chip of smart cards. Change in data at either side will
update both the linked databases.
Step 5: Opening of Bank Accounts
32. Under new e-Tax system, keeping a bank account will be made mandatory for
every CNIC holder. State Bank will collect data of existing account holders from all
commercial banks and will compare the same with NADRA database. Query will extract
all those CNIC holders who will not be having bank accounts at any bank. Through an
automated procedure, bank accounts will be opened at once of such people at nearest
branches (as per address available in NADRA database) of different bank. Relocation
of people from their permanent addresses will not matter because under new system
people will not need to visit their banks for operation of their accounts.
Step 6: Linking of MNOs with SBP Database
32. Servers of 04 Mobile Network operators (MNOs) will be linked with State Bank
database through intranet. Considering activity logs at MNOs servers, currently active
SIMs will be identified. CNIC number available in MNOs servers against active SIMS
will be verified through NADRA database and verified SIMs on the basis of CNICs
cross verification will be marked at RegisteredSIMs. Mobile numbers of so registered
SIMs will be made accessible to NADRA for their entry in chips of smart cards and to
commercial banks for remote operation of bank accounts. People having CNICs but not
RESTRICTED
23
RESTRICTED
bank accounts or registered SIM cards will be notified though media that their bank
accounts are opened and they should submit their registered mobile numbers to
concerned banks through personal visits, through intranet web of SBP or by sending
SMS to a particular SMS server.
Step 7: Remote operation of Bank Accounts
33. After necessary automated verification of users through SMS server based
questioner, they will be communicated their financial numbers and pin codes through
SMS or through their personal visits at nearest bank branches. The provided financial
numbers and PIN codes will be used by them for operation of their bank accounts
distantly in many ways.
Step 8: Replacement of CNICs with Smart Cards
34. At this stage NADRA will issue Smart
Cards to existing CNIC holders. Forthwith,
the conventional CNICs will be discontinued
for ever and only Smart Cards will be used by
all Pakistanis. Smart Cards will contain all
financial and biometric record of personnel in
the chip embedded on them. NADRA will
keep updating data on issued smart cards of
people regarding their debit / credit cards,
health, insurance, property, passport, ammunition license, driving license, terrific
violations, criminal history, loans record etc in phases. Ultimately only smart card will
be used to represent all legal and financial documents. The Smart Cards technology is
already available with NADRA. The cards are being issued since last few years. For
the purpose of implementation of e-Tax system, NADRA will just need to expedite the
existing process of replacing CNICs with Smart Cards.
Step 9: Inflow of Black and laundered money in the system
35. The exact volume of black economy of Pakistan is unknown, however it is
believed that parallel black economy of considerable size exists. Moreover laundered
money only is Swiss banks amounts to $200 Billion (Rs 21500 Million)
51
. This amount is
seven times the value of budget of Pakistan for FY 2012-13 (Rs 3985 Billion)
52
and
remains free of all tax obligations under existing taxation system. At this stage of
preparation for e-Tax system implementation, Government of Pakistan will notify
through media that black and laundered money should be deposited by concerned
persons in their respective bank accounts in Pakistan by a due date, failing which the
black money will turn into worthless pieces of papers and laundered money will be
retrieved back in national treasury by filing cases in international courts.

51
Financial Daily news report. http://thefinancialdaily.com/NewsDetail/140818.aspx
52
Chapter 2 Para 2.1(a) and (g) of Budget in Brief. http://finance.gov.pk
RESTRICTED
24
RESTRICTED
Step 10: Launching of web portals / pages on Intranet
36. In addition to existing web portals of different Government departments available
on internet, all departments will launch their web portals on intranet also for interaction,
awareness and utilization of general public. Moreover launching of web sites will be
made mandatory for all business organizations of the country.
Step 11: Induction of Cash Coupons
37. In order to overcome anonymity of financial transactions it will be proposed after
a couple of further steps that currency notes and coins should be discontinued and bank
accounts based e-payment system should take over. As mentioned earlier at Para 19,
as per report of Intermedia knowledge centre USA, 98% of the population of Pakistan is
having access to mobile phones and SIM Cards, yet a considerable part of population is
illiterate, non user of cell phones or unsuitable to fit in money less culture. There are
minors as well who neither have bank accounts nor NICs but need money to survive.
The less educated, illiterate and minors cannot be ignored. A parallel system of cash
coupons will facilitate these quarters to be active part of the economy. They will be
equally good e-money users and tax payers but without use of mobile phone or internet/
intranet. Cash
coupons of different
denominations
(somewhat similar to
shown in this picture)
will be printed at
security printing press.
Operation and
characteristics of cash
coupons are described
as under.
(a) Cash coupons will be printed in all denominations from Rs 5 to Rs1000
as in case of currency notes.
(b) All cash coupons will be embedded with magnetic tape and bar code.
Value and expiry date will be saved in the system database as well as in the
magnetic tape of the coupons.
(c) Cash coupons will be timed instruments. Value of each coupon will
required to be credited to some bank account before its expiry, failing which the
value of the expired coupon will automatically be credited to treasuryaccount.
(d) Users of coupons will be able to charge value of their coupons to any bank
accounts through any of the following methods.
RESTRICTED
25
RESTRICTED
(i) Like a mobile scratch card, the hidden serial number of card can be
sent in a text message to SMS server of the system. The system in
response will prompt the financial number and the value will be credited to
respective bank account.
(ii) By sliding in any of the POS machines or by scanning through
system connected bar code readers installed at shops and stores.
(iii) By slipping the coupon into ATM machine.
(iv) By depositing the coupon at bank counter (incase of depositing
large number of cards at the same time).
(e) Coupons will be purchasable from ATMs, Bank counters, shops, stores
etc.
(f) 2% of the value of purchased coupon will be credited to treasury account
at the time of purchase. Tax free movement of coupon will be allowed for a very
short period of time after which the card will expire.
(g) Cash coupons will be used by minors, less educated people, street
vendors and beggars etc. Moreover limited number of cards can also be used
by modern users for making payments to mentioned classes of people.
(h) In order to make sure that no coupon is used for manual transaction after
its value is credited; security features of the coupons will be kept hidden under
scratch able strips. Coupons with reveled security features will not be accepted
for manual transactions. However bank counters and ATMs will use automatic
shredders to destroy the coupons after crediting their value to bank accounts.
Step 12: Alteration of ATMs (Hardware and Software)
38. Existing ATM machines are mainly used for withdrawal of cash. There are some
secondary uses also including transfer of funds, balance inquiry, utility bills payment,
bank statement etc. An other type of ATM also exists in modern economies of the
world which accepts cash deposits also in addition to mentioned routine features. For
the purpose of implementation of new e-Tax system hardware and software of ATM
machines will be altered so that they should be able to receive and issue cash coupons
instead of cash. In addition ATM machines will be enabled for intranet web browsing
and smart card reading.
Step 13: Provision of coupon readers and Smart Card Readers
39. All shops, business counters and outlets will be supplied with coupon reading
and smart card reading machines. Smart card readers are already in use in Europe
RESTRICTED
26
RESTRICTED
and coupon reader is nothing but a debit/card reading machine. Most of the big stores
are already using Debit/Card reading machines in Pakistan
Step 14: Discontinuation of paper money and coins
40. After going through all above mentioned steps (1 to 12), Government of Pakistan
will be able to discontinue the existing paper money and coins. Public will be notified
through media to deposit their cash in hand in respective bank accounts by presenting
at any branch of any bank irrespective of the fact that their accounts exists in the same
branch/bank or any other. Paper money and coins will stand invalid after the notified
deadline. This step is expected to bring a pleasant surprise for Government because all
black money in the country will no more remain underground and untaxed. On every
transaction, treasury will receive 2% of the value of transaction. The amount available
in bank accounts will be used by respective account holders for financial transactions
using any or all of the following methods.
(a) Cash Coupons
(b) Mobile Phones; by text messages with systems SMS server.
(c) Smart Cards
(d) ATM machines
(e) Intranet; accessible through cell phones, ATMs, PDAs, Personal
Computers and Laptops.
e-Tax Regime in action
41. Once the system will be in operation, all financial transactions will start taking
place through Bank Account Based e-Payment System (BABEPS). All smart card
holders (previously CNIC holders) will be operating their respective bank accounts
remotely using their mobile phones, coupons, smart cards, Intranet and ATMs. Every
single transaction will be known by the Government and system will manage to credit
2% of the value of each transaction into bank account of national treasury. All existing
taxes will be discontinued and economy will experience a steep depression in general
price level. General public will be happy with decrease in prices of goods and
discontinuation of numerous direct/indirect taxes. Government will be happy to collect
more tax revenues due to maximum of breadth of tax base. Banks will be happy to
have more accounts/deposits, managed with less manpower due to least interaction
with account holders. Business community will be happy due with reduction in cost of
production and increased purchasing power of general public. Thinking hypothetically,
It sounds good, but it will be of no use if it is not established with support of factual
calculations that Government will be able to collect more tax revenue with this system of
2% tax after abolishing all existing taxes.
RESTRICTED
27
RESTRICTED
E-TAX SYSTEM: REVENUE EXPECTATIONS
42. Before going into detail of e-tax systems revenue earning capabilities, the
outcome of existing tax system need to be reviewed. At Para 13 of this paper, types
and rates of existing taxes are presented. Rates of direct taxes are so high that
business men find themselves justified in tax evasion. Indirect taxes are being charged
at so high rates that items are daily use has become out of reach of general public.
Excessive duties and taxes on fuel have added additional cost to nearly all items. After
levy of so many taxes at extremely high rates the outcome in terms of total revenue
from taxes is not
contributing significant
share in total budget of the
country. Tax revenue
contribution for FY 2013-
14, as shown in this
graph
53
contribution of all
taxes collectively in total
budget of 2013-14 is not
more than 50%. 37% of
the budget consists of
foreign aid and
borrowings. On top of it,
World Bank is pressing
hard to further increase
taxes and general price
level as a condition of
grant of additional loans,
which are necessarily
required to fill the
budgetary gap.
43. The e-Tax system will comprise of only one Tax, @2% of the transaction value.
Aggregate value of total transaction made in a day, moth or year cannot be calculated
exactly before implementation of the e-tax system. However, a literarily rational can be
developed for assessing this value. While discussing about revenue generation
potential of a tax system where every Pakistani will be a tax payer, we need to consider
the black or parallel economy as well which is roughly double the size of documented
economy. Under following different prospective expected revenue of e-Tax system can
be assessed.
(a) Per Capital Income approach. Per Capita income is calculated by
dividing national income by population of the country. It was Rs 131,543 for
FY 2012-13
54
. Multiplying per capita income with population of 180 Million, the

53
Source: http://www.riazhaq.com/2013/06/pakistan-to-borrow-billions-more-to.html
54
As per Min of Finance http://finance.gov.pk/survey/chapters_13/HGHLIGHTS%202013.pdf
RESTRICTED
28
RESTRICTED
sumof total transactions comes to Rs 23.68 Trillion per year. Velocity of money
is number of times a rupee changes hands in a given period of time. It is
expected that a rupee will change at least 3 hands in a month in an economy
where 100% population is transacting online. Therefore transaction velocity of
rupee will be 36 (12x3) for a year. The sum total of transactions will be Rs 852.4
Trillion (23.68x36) for a year. If tax is collected @ 2% on each transaction, total
revenue for a year is expected to be Rs 17.05 Trillion (852.4x0.02).
(b) Money in Circulation Approach. As per State Bank of Pakistan money
in circulation is Rs 11.43 trillion
55
. Taking above assumption of yearly transaction
velocity of money of 3 per month as a yard stick, the yearly volume of
transactions will be Rs 255.84 Trillion and 2% Tax revenue will be Rs 8.23
Trillion. Further if we take Rs 63.96 Trillion
56
non currency based transactions
into account, a further revenue of or Rs 5.12 trillion (@ 2%) will be added making
total revenue of Rs 13.35 Trillion per year.
Comparison of expected revenues and liabilities
44. The expected revenue from the proposed e-Tax system is worked out with two
different approaches. Let us analyze that with this much yearly revenues will the
country be able to fulfill its liabilities.
(a) Per Capital Income approach. Rs in Trillions
REVENUE LIABILITIES DIFFERENCE
1
st
Year 17.05 Budget 3.99
Debts 17.36 21.35 (4.30)
2
nd
Year 17.05 Budget 3.99
Debts 4.30 8.29 8.76 Surplus
(b) Money in Circulation approach
1
st
Year 13.35 Budget 3.99
Debts 17.36 21.35 (8.00)
2
nd
Year 13.35 Budget 3.99
Debts 8.00 11.99 5.06 Surplus
45. As worked out above, the country is expected to be self sufficient within a period
of one and a half year and by the end of 2
nd
year after implementation of e-Tax system,
surplus amount of more than full year budget of the country will be with Government for
development of the country. The implementation of e-Tax system is not just a recipe of
self sufficiency but it will carry lot of other benefits also. These benefits are related to
good governance, ease of compliance, transparency, economic benefits etc. A brief
account of benefits of e-Tax system is presented.

55
State Bank of Pakistan http://www.sbp.org.pk/ecodata/M3.pdf
56
As per payment review system report of SBP for 1
st
Qtr of 2014 (Sum of table 1 to 4), Quarterly figures
of Inter Bank (30.58 Tr), Instrument (26.96Tr) and e-transactions (6.42 Tr) multiplied by 4 to get yearly
transactions. http://www.sbp.org.pk/psd/reports/2014/First-Quarterly-Review-FY13-14.pdf
RESTRICTED
29
RESTRICTED
BENEFITS OF E-TAX SYSTEM
46. Heavy Tax Revenues. Since last 66 years efforts are being made to increase
the tax base but no visible results are observed. After lot of tax reforms the final
outcome is very discouraging. The existing tax system is capable of generating
revenues equal to only 50% of the budget or even less. The e-Tax system will generate
much more than budget requirements and all internal and external debts will be cleared
within 1.5 years time.
47. Ease of Compliance. Compliance means payment of taxes. Economists of all
times believe that if tax compliance procedure is simple and easy, more taxes payers
will show their interest in payment of taxes. Compliance is considered as a yard stick
by Department for International Development (DfiD) UK (Para 5) to grade any tax
system as best of others. It also is included in Tax Cannons of Adam Smith
57
. The e-
Tax system will be at height of it. There will be no formal tax returns, tax audits, rebates
and confusing tax SROs. Tax will be deducted automatically from each transaction and
will be credited to treasury account.
48. Correct Calculation of National Income. National income is a prime indicator
of any economy. It is either calculated through income or expenditure method. In the
existing system it is never calculated correctly due to many factors, one of which is
underground economy comprising anonymous transactions. In the proposed system
exact National Income will be calculated and no business activity will remain under the
carpet.
49. Decline in General Price Level. All existing taxes will be abolished with the
implementation of e-Tax system. As a result sale price of existing commodities will
suddenly decrease by 17% to 20%. At a later stage, the decreased cost of production
owing to decline in cost of raw materials will also add its share in decreasing the general
price level.
50. Boom in Business and employments. Availability of working capital is an all
time challenge for ongoing businesses. In the proposed system a buyer will be able to
buy raw materials costing more than his bank balance. The seller will received full
payment and a loan will be generated against the buyer, which will be payable in easy
installments. These arrangements will keep business wheal spinning. Same will be
valid for consumers; therefore their purchasing power will increase. Every increase in
demand of consumer goods increases supply (production). Requirement of heavy
production will increase the demand of manpower. A level of Full Employment is
expected as a result.

57
Wealth of Nationsby Adam Smith (1776), The father of modern political economy. Association of
chartered certified Accountants (ACCA) submitted a policy paper Tax Principles from Adam smith to
Barack Obama and simplicity in taxation was stressed upon.
http://www.nctbpu.org.ua/pdf/analytics/Tax_Principles.pdf
RESTRICTED
30
RESTRICTED
51. Equality. Equality is an other tax cannon of Adam Smith as mentioned in his
book Wealth of Nations. It means that tax should be charged indiscriminately. Goods
and service are equally good for generation of income at individual and corporate level.
Presently, major portion of taxes is being collected from goods and a negligible portion
from services. This is due to lack of documentation in services sector. Proposed
system will levy tax on goods and services alike. Non documentation at individual and
corporate level for rendered services will not affect the new taxation system.
52. Revival of Banking sector. Presently banking sector is under merger and
acquisition wave do to low return. Under the proposed e-Tax system banks will be
having a vital role in the economy. They will be benefited on following counts.
(a) Heavy deposits (Large number of accounts in each bank).
(b) Cost effective due to minimal counter dealing.
(c) Economy of manpower due to no cash dealing.
(d) Economy in cash transportation, storage and security set up costs.
(e) More investment due to high rate of profit and easy processing.
(f) Discontinuation of Cheques, Drafts, MTs, TTs, Travelers' Cheques etc will
provide economy of manpower.
(g) More profits due to more accounts and offering e-loans.
53. Recovery of Utility Bills. Presently bills of Government owned utilities are not
being recovered fully. A large number of politicians, businessmen and general citizens
are defaulters of Govt owned utility services. Under proposed system, 100% recovery
of utility bills will be ensured. The bill will be intimated through SMS and reply to the
SMS will pay off the bill from concerned bank account. If no queries are raised by the
consumer for a given period of time the amount of bill will be automatically deducted
from his account and will be credited to the account of concerned department. There
will be a remote chance of circular debt in any of the service providing Government
department.
RESTRICTED
31
RESTRICTED
RECOMMENDATIONS
54. Keeping in view the findings revealed during course of the research work, it is
recommended that:
(a) Heavy taxes; 5% to 25% on individuals and 25% to 35% on companies
may be abolished to provide relief to long suffering population.
(b) Only one tax @ 2% of transaction value may be levied on all population of
Pakistan, indiscriminately.
(c) Tax base may be increased from 0.81million
58
tax payers to 180 million
tax payers.
(d) Recommendations from (a) to (c) may be achieved through following
actions.
(i) Legislation may be done for implementation and operation of e-Tax
and Electronic Retail Payment Services (ERPS).
(ii) Nation-wide Intranet may be established to provide a secured and
fire walled medium for connectivity of all financial transactions taking place
in the country with revenue collecting authorities and for connectivity of
NADRA and commercial banks with State Bank of Pakistan.
(iii) Intermediary software modules may be implemented for real time
data linking of all commercial banks with database of State Bank of
Pakistan.
(iv) Each adult Pakistani may be issued with NADRA Smart Card.
Keeping of at least one registered SIM and a bank account may be made
mandatory for him.
(v) All mobile network operators may be linked with State Bank of
Pakistan directly or through nearby commercial banks.
(vi) All paper money and coins may be got deposited in commercial
banks and conventional money may be abolished forthwith. Meanwhile,
time bound cash coupons may be spread in the country to replace paper
money for use of those who are not in access of any online media.
(vii) Hardware and software of ATM machines may be alerted to accept
and issue cash coupons.

58
Daily DAWN 20 Dec 2012, State finance minister said that 3.39 million people are issued with NTN but
only 0.81 million people filed their tax returns in 2011-12.
RESTRICTED
32
RESTRICTED
(viii) Cash coupon readers and smart card readers may be provided on
all points of sales and businesses.
(e) Bank accounts may be operated by whole population of Pakistan through
internet connected or G3 connected devices. 2% tax on each transaction may
be credited to treasury account. The transactions include sale and resale of cash
coupons also.
RESTRICTED
33
RESTRICTED
CONCLUSION
55. Adam Smith is considered father of modern political economics. In his
internationally famous book Wealth of Nations (1776) he spelled out Tax cannons;
Equity, Certainty, Convenience and Economy. Word Bank and International Finance
Corporation UK presented a comparative study of tax systems of the world 189
economies on the basis of Tax Cannons of Adam Smith. Pakistan was ranked 166
th
out
of 189 economies. Association of Chartered Certified Accountants (ACCA) presented a
policy paper Tax Principles from Adam Smith to Barack Obama stressing upon the
same Tax cannons. Pakistans economy is more needful for tax reforms because Tax
system of Pakistan is generating less than half of the annual budget requirements.
Spokesman of Department for international Development (DfiD) UK said in connection
with provision of aid to Pakistan We have made it clear to government and opposition
politicians in Pakistan that it is not sustainable for British taxpayers to fund development
spend if Pakistan is not building up its own stable tax take
59
. It is a sorry state that tax
evasion, corruption and fraudulent accounting are now parts of culture of the country
and other nations are teaching us to pay taxes.
56. Over last 66 years, it is leaned that no tax reform in the existing tax system can
make the country self sufficient. The final outcome of all previous tax reforms is
hopeless. As of today Pakistan is under Debt of Rs 17.36 Trillion. Total tax and
revenue earning capacity of the country is not more than Rs 2.6 Trillion. Average yearly
budget is about Rs 4 trillion. Here a question arises, how a country, whos tax system is
not able to generate revenue covering half of its budget can be free of its budget and
debt liabilities? Undoubtedly, no conventional measure can work to fill this huge gap.
How to make Pakistan Self sufficient was the research question of this research. In the
torch light of Adam Smiths Tax Cannons and realizing the fact that there is no more
room for corrective measures in the existing tax system, a new tax system is proposed
in this research as a way out to overcome the adverse economic situation of the
country. A simple tax system where tax rate is very low, aggregate revenue is very
high, no lengthy procedures involved and no departments like Federal Board of
Revenue and Provincial boards of revenues are required. Modern economies are also
thinking on the same lines and they will surly adopt similar system in future. But why
Pakistan can not be the first economy to implement a new Tax System which other
economies of the world will follow on the footsteps of Pakistan, in future. Is it fate of
this country that only those technologies, measures and systems can be adopted which
are becoming or have become obsolete in rest of the world?
.
(10885 Words)

59
A news by BBC news on 4 April 2013
RESTRICTED
34
RESTRICTED
REFERENCES
Min of Finance, Govt of Pakistan. Budget in Brief 2012-13. Retrieved from MoF
website: http://www.finance.gov.pk/budget/Budget_in_Brief_2012_13.pdf
Foreign Exchange Department, State Bank of Pakistan. Retrieved from SBP website:
http://www.sbp.org.pk/sbp_bsc/bsc/epd/exch_coms.pdf
State Bank of Pakistan. (11 J uly, 2013). Foreign Remittances. Retrieved from SBP
website: http://www.sbp.org.pk/press/2013/Remittance-11-J ul-2013.pdf
State Bank of Pakistan. Summary Balance of Payments. Retrieved from SBP
website: http://www.sbp.org.pk/ecodata/BOP-Services/bop.pdf
State Bank of Pakistan, Statistics & DWH Department. Home Remittances. Retrieved
from SBP website: http://www.sbp.org.pk/ecodata/Homeremit.pdf
State Bank of Pakistan, Payment System Department (Planning & Development
Division). 3
rd
Quarterly Report on The Retail Payment Systems of Pakistan.
Retrieved from SBP website:
http://www.sbp.org.pk/psd/reports/Status_Report_Q_3_08-09.pdf
State Bank of Pakistan, Payment System Department. Payment System Review J uly-
Sep 2013.. Retrieved from SBP website :
http://www.sbp.org.pk/psd/reports/2014/First-Quarterly-Review-FY13-14.pdf
Paying Taxes 2014, The Global Picture, A comparison of tax systems in 189 economies
worldwide by PWC and World Bank. Retrieved from PWC website:
http://www.pwc.com/gx/en/paying-taxes/assets/pwc-paying-taxes-2014.pdf
State Bank of Pakistan, Banking Surveillance Department. Understanding Credit
Information Bureau, Consumer Awareness Program. Retrieved from SBP
website :http://www.sbp.org.pk/bsd/cib_awareness.pdf
State Bank of Pakistan. Components of Monetary Assets. Retrieved from Press
Information Department, Govt of Pakistan website:
http://www.pid.gov.pk/Statistical%20Appendix/MONEY%20AND%20CREDIT.pdf
State Bank of Pakistan. Development Finance Group. Branchless Banking Newsletter,
Issue 7 (J an-Mar 2013). Retrieved from SBP website:
http://www.sbp.org.pk/publications/acd/BranchlessBanking-J an-Mar-2013.pdf
State Bank of Pakistan. Pakistan Economic Survey 2012-13. Retrieved from GoP, MoF
website: http://www.finance.gov.pk/survey/chapter_12/05-MoneyAndCredit.pdf
RESTRICTED
35
RESTRICTED
Economic Survey of Pakistan 2012-13, Highlights 2012-13 (Page 2). Retrieved from
MoF, GoP website:
http://finance.gov.pk/survey/chapters_13/HGHLIGHTS%202013.pdf