Taxation in Pakistan is a complex system of more than 70 unique taxes administered by 37 agencies of the government of Pakistan. Pakistan’s taxation system consists of various heads and sub-divisions with a complex structure. To simplify the tax laws, Pakistan’s Finance And Revenue Advisor Shaukat Tarin has launched the formulation of the Inland Revenue Code (IRC). The IRC will harmonize all inland taxation laws and maximize the facilitation of taxpayers.
The objective of the formulation of IRC is to remove the multiplicity of taxing statutes and a plethora of rules and regulations devised to operationalize them. The formulation of IRC contributes to a sustainable increase in domestic revenue by broadening the tax base and facilitating compliance.
The FBR has constituted a high-level committee consisting of tax professionals and legal experts. The committee is tasked to harmonize all four tax laws by merging them into one law book. The Income Tax Ordinance 2001, the Sales Tax Act 1990, the Federal Excise 2005, and the Islamabad Capital Territory (Sales Tax on Services) Ordinance 2001, are the four major tax laws. According to the FBR, the harmonization and simplification of tax laws have been demanded by the World Bank, IMF, ADB, and other bilateral and multilateral donors.
IRC will be enforced from July 1, 2022. It is expected that the IRC would facilitate the taxpayers, as it would provide them to carry through their tax matters in one organizational structure. It will promote a culture of automation and digitization in order to ensure taxpayers’ facilitation.
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