Pakistan – Step forward, reform and compete with the rest of the world – Part 5.

Pakistan – Step forward, reform and compete

with the rest of the world – Part 5.

Did we ever wonder why only 5.2 million (out of 250 million) or 2% individuals filed tax returns in Pakistan in 2024?  Out of these, 2 million individuals filed nil tax returns. Did we ever wonder why in a neighboring country Uzbekistan, 5.3 million (out of 37 million) or 14% individuals filed tax returns in 2024, while the number of nil tax returns was zero? Did we ever wonder, why do we have a large informal, untaxed and un-monitored economy?

While there are many reasons and excuses, the self-created bottlenecks of a bureaucratic and bloated tax collecting organization top the list. We fail to understand that the world improved tax collection by using creative techniques and technology and not by acquiring more luxury cars for the tax collectors.

Consider one simple and smart technique used by Uzbekistan.  All sales receipts are required to have a QR code (linked to the tax department) that includes complete data about the supplier, VAT number, goods, services, date, time and the total amount including VAT charged from the customer.  Simultaneously, customers are incentivised to use a mobile app ‘Soliq’, to scan and send the QR code on the sales receipt to the tax department.   An automatic 1% refund of the total purchase amount is credited to the linked bank account of the customer every month.  In 2023, 2.5 million consumers received approximately 1.1 trillion Soums in cashback through the ‘Soliq’ mobile application.

Scanning and sending the QR code on sales receipts and receiving a refund of 1% of the total purchase amount is a simple and brilliant incentive scheme that could plug Pakistan’s numerous fiscal black holes. It would ensure that the businesses properly register sales and pay taxes. It would enlarge the formal economy by promoting registered transactions and it would encourage digital payments and electronic receipts.

What is stopping Pakistan from shedding its gloomy past and taking a bold step forward towards a progressive digital future?

Naeem Sadiq

March 28, 2025