Why do people need to file their taxes?

A majority of Pakistani people confuse tax filing with tax paying. Both of these two terms are actually two different things. Knowingly and also unknowingly, people tend to avoid filing their taxes which also led them to not availing its associated benefits.    

Let’s classify these two things briefly; tax filing is simply documenting your income, assets, and expenses, meanwhile paying taxes is simply paying taxes on anything you buy, sell, and keep. Paying taxes is further divided into two taxes: direct taxes and indirect taxes.

People whether they are individuals, businessmen, or corporate entities have to comply with tax filing. In Pakistan, in the budget 2024-2025, the salaried class is the only category which was highly taxed and also it contributed heavily in taxes to the national exchequer.     

Let’s simplify people’s need to file their taxes in this thread: 

Legal Obligation: 

Income tax ordinance 2001, makes it necessary to file your tax returns, whether you’re an individual or a businessman. 

In the case of non-compliance, it can lead to penalties, fines, and even legal action. Filing your taxes ensures that you abide by the tax laws and in return it saves you from legal troubles.

Contribution to National Development:

The revenue which government earns through tax collection, is spent on the following sectors: 

• Infrastructure development (roads, bridges, and public transport systems)
• Education and healthcare facilities
• Security and defense 

Filing your taxes is equivalent to directly contributing to the progress and prosperity of Pakistan. 

Access to Government Benefits: 

Becoming a filer in Pakistan can lead to take advantage of several benefits, like for instance: 

• Lower withholding tax rates on banking transactions, property (buying and selling), and vehicle registration.
• Access to government-funded programs and subsidies.
• Greater ease in obtaining visas, loans, and financial services.

Tax filing serves as a multipurpose benefit for people. It not only helps you fulfill your civic duty but also lets you gain benefits over non-filers.

Promotes Transparency: 

Filing your tax returns makes sure your financial transparency and accountability. By doing so, you tend to declare your income, assets, and expenditures. By filing your taxes you gain the following traits:  

• Maintaining a clear financial record.
• Avoiding potential audits or inquiries from tax authorities.
• Building a credible financial profile that can be beneficial for future investments or borrowing.

Avoidance of Mishaps:

Failing to file taxes within the due date or continuing to remain as a non-filer, can lead to face harsh consequences. It includes:

• Monetary penalties & fines.
• Freezing of bank accounts, blocking of SIM, and disconnecting the utility connection. 
• Legal proceedings.

Filing your taxes within the due date can relieve you from any risks and helps you maintain your financial reputation. 

Strengthening the Economy:

Just like other factors contributing to Pakistan’s economy, the taxation system is considered a dynamic and most proactive one, as it is the backbone of any country’s economy. The more people file their taxes, the greater the government gets resources to invest in, few instances are given below: 

• Poverty alleviation programs
• Small and medium enterprises (SME) development
• Disaster relief and management

By filing your taxes, you simply play your individual vital role in strengthening Pakistan’s economy. 

Moral and Ethical Responsibility: 

Paying taxes is not only a civic and legal duty but it is also a moral and ethical duty as well. As a Pakistani citizen, it is our collective responsibility to contribute to the cause of paying taxes which in return supports the wellness of our society. The filing of our taxes ensures the following: 

• Wealth distribution is more equitable
• Public services are adequately funded
• Social disparities are reduced

By filing your taxes, you played your direct role in strengthening Pakistan’s economic resilience.

Concluding Remarks

Filing your taxes in Pakistan, is not merely just a formality to be fulfilled but a vital duty that fosters individual benefits and national progress. 

Your filing of taxes supports Pakistan’s developmental infrastructure, strengthens its economy, and promotes social equity. 

Just keep in mind that every rupee you pay in taxes contributes to a more progressive and prosperous Pakistan.