Taxation is an essential part of any country’s development, and Pakistan is no exception. Taxation plays a crucial role in the country’s overall growth, with the government relying on taxes to fund various social and economic development programs. While taxes are a crucial source of revenue for the government, they also play a crucial role in human development in Pakistan. In this article, we will discuss the relationship between taxation and human development in Pakistan.
Human Development Index (HDI) is a widely used indicator that measures a country’s human development in terms of three main factors: health, education, and income. Pakistan’s HDI ranking has been improving over the years, but the country still lags behind many other countries in the region. The current HDI ranking of Pakistan is 154 out of 189 countries.
One of the critical reasons behind Pakistan’s low HDI ranking is the lack of investment in social sectors like health and education. The government’s budget allocation for these sectors is relatively low, making it challenging to improve these areas’ overall performance. However, taxation can play a crucial role in bridging this gap by providing additional revenue to the government to invest in these critical sectors.
In Pakistan, the majority of the tax revenue comes from indirect taxes like sales tax, customs duty, and excise duty. These taxes are regressive in nature and affect low-income earners more than high-income earners. This makes it difficult to achieve the government’s social and economic development goals, as low-income earners are the most vulnerable segment of society.
To address this issue, the government needs to shift its focus towards progressive taxation. Progressive taxation is a tax system in which the tax burden falls more heavily on high-income earners than low-income earners. This will not only help to reduce income inequality but also provide additional revenue to the government to invest in social and economic development programs.
The government has already taken some steps towards progressive taxation by introducing a progressive income tax system. However, more needs to be done in this regard to make the tax system more equitable and just. The government also needs to broaden the tax base by bringing more people into the tax net. The current tax-to-GDP ratio of Pakistan is around 11%, which is relatively low compared to other developing countries. By broadening the tax base, the government can increase the tax revenue, which can be used to invest in social and economic development programs.
In addition to providing additional revenue, taxation can also play a role in promoting accountability and transparency in the government’s spending. When citizens pay taxes, they have the right to demand accountability and transparency from the government in its spending. This can help to reduce corruption and improve governance, which is critical for human development in Pakistan.
In conclusion, taxation and human development are closely linked, and Pakistan needs to focus on progressive taxation to bridge the gap between social and economic development. The government needs to shift its focus towards progressive taxation and broaden the tax base to provide additional revenue to invest in critical sectors like health and education. Taxation can also promote accountability and transparency in the government’s spending, which is essential for promoting human development in Pakistan. By focusing on these areas, Pakistan can improve its HDI ranking and achieve its social and economic development goals.
