Tax Amnesty Schemes in Pakistan and their Effect on Tax Collection and Economic Performance

Abstract

Tax is a significant source of income for governments worldwide, and a strong taxation system has a long-term impact on a country's economic performance. However, people often do not report their exact earnings to avoid taxes, leading to a loss in tax collection and ultimately affecting government revenue. Business-friendly tax policies can attract new investors, improve the confidence of existing businesses, encourage reforms, increase tax collection, and help build industries and infrastructure. The central theme of this Paper is to examine introduction of tax amnesty schemes in Pakistan in the years 2018 and 2019 and their effects on tax collection and economic performance. The short-term effects of tax amnesty schemes in countries like Pakistan may appear favorable, but their long-term effects are less clear. These schemes are considered controversial and can have adverse impacts on the overall tax collection system and economic performance, as they may encourage tax evasion and whiting of black money. The issue under study is significant as it will highlight important policy issues relating to tax amnesty schemes in Pakistan. By examining tax amnesty schemes in Pakistan this study aims to conclude the benefits of tax amnesty schemes and their drawbacks. The findings of this research can guide the government in making informed decisions about tax policy and help improve tax collection and economic performance in the country. Case study method has been used for analysis of tax amnesty schemes introduced in Pakistan in the years 2018 and 2019 and their comparative analysis with earlier tax amnesty schemes. Tax amnesty schemes, based on their nature, tend to widen tax gaps and do not address structural inefficiencies. Pakistan's tax system is complicated and often discriminatory, leading to inadequate revenue generation. Consequently, Pakistan needs a series of reforms to improve its tax collection and enhance economic performance. Instead of relying solely on tax amnesty schemes, the government should focus on overhauling the Federal Board of Revenue (FBR), building confidence in tax institutions, automating tax systems, and introducing a system that incentivizes citizens to join the tax net. By implementing these policies, Pakistan can increase its tax revenue and improve its economic performance. Based on research work carried out policy recommendations have been given regarding tax collection and economic performance in view of amnesty schemes launched in Pakistan.