EDITORIAL: The government is desperate to increase its tax revenues to meet the International Monetary Fund (IMF) conditions for the upcoming programme where the intention is to have a larger programme. However, for that to materialise the IMF is asking for more resource mobilisation or higher tax-to-GDP revenue generation for the obvious reason of debt sustainability. Successive governments have failed to expand the direct tax base and to bring those out of the tax net into the system.

And, invariably, the modus operandi is to collect direct taxes in an indirect fashion. In their quest for a signficiant increase in the collection of revenue, successive governments have, without exception, pursued this task by targeting the low-hanging fruit for the obvious reason: ease of collection. In pursuance of this objective, they created a presumptive tax regime whereby the taxpayer was required to pay a certain percentage of its annual turnover as income tax, irrespective of the fact whether it had a loss or profit and this presumptive tax would be the final discharge of its tax liability and would not need to submit the books of accounts to FBR (Federal Board of Revenue).

Businesses were only too pleased to accept this regime as this allowed them the freedom to charge their personal and domestic expenditure to their business. Various rates of presumptive tax ranging from 0.5 percent to 8 percent of turnover were levied on different classes of taxpayers.

However, this regime created .