Introduction:

Tax is a charge in terms of monetary which is paid by public to the government.

Tax evasion:
Tax evasion is the process in which the tax payer does not attempt to pay the tax to
the respective authorities.

Causes of Tax Evasion in Pakistan.

High tax rate:

People do contribute to pay a fair amount of their earning in the national

development in which they live and also for the betterment of it. But if the amount
reaches a very high percentage to pay, then people are compel from it and try to
avoid this tax which they have to pay. High tax rates change the decisions of a person
to either pay it or not and hence the willingness of paying tax is lost. In a survey our
Pakistan 78% people answer that the tax we pay is quite high. High tax encourage
people to avoid it. They will always try to find a way to evade tax.

Corrupt government:

This is one of the wide and most common cause of tax evasion. Public refuse to or
evade tax due to the corrupt government. The corruption maybe political or might
be the corruption of government.
Through such unrighteous ways people avoid to pay tax. Most of the companies that
are gaining high profits evade tax by paying the corrupt authorities in order to
maximize their profits. The rich and elite families evade tax through the use of power
and then enjoy the public funding in result.

Complex tax system:

Another cause of tax avoidance in many developing countries like Pakistan is the
Complex and unfamiliar process of the book keeping, tax calculation and preparation
of the revenues. They are usually less educated and because of lack in education the
book keeping people are annoyed to get them registered with the authorities that
collect tax, and they try to run from paying tax legally or illegally.

Go with the flow:

As the private organization and people are refusing to pay tax or avoid it, then
people who pays it also stop to pay tax. People follow the behavior of others, if they
are not paying, those who pay will also stop paying it.

Unproductive Expenditures and Unequal Distribution of Funds by Governments:

In order to get political support and votes in the years to come, most governments
or leadership in developed countries try to invest a significant amount of public
funds in the areas/cities from which they belong. This disturbs people in other fields
and offers justification and explanations for participating in activities of this sort that
help them minimize their tax liability.

Lack of education:

Lack of education in Pakistan has also caused evasion of tax. Because most of the
people are unaware of tax, some of them have no idea how tax is payed. They are
also unaware of the tax benefits, which will eventually help in the development of a
country. The people working in the tax collecting agency are also sometime
uneducated creating a loophole for tax evaders.

Tax culture:

Just like other countries where everyone feels responsible to pay their tax for the
betterment of their country. Government also utilizes the tax by offering services
and benefits to the public in return. But unfortunate Pakistan lack this environment.
Pakistan's tax culture is also missing. People are unaware of the programs and
incentives offered by the government with tax assistance or the standard of
Government-provided programs are very bad and individuals are not happy with
them. As a result, they believe taxes are an additional burden on their pockets and
they feel justified in avoiding taxes.

Amnesties and Incentives:

Tax amnesties are used by most administrations as part of the fiscal policy. The
amnesty is a program that governments propose from time to time and allows
taxpayers to pay their previous taxes with little or no liability for fines or surcharges,
only the principal amount of unpaid tax. In order to raise revenues, the Government
of Pakistan is also using these strategies. But it also have a cost which government
have to pay, that is it influence the honest tax payer or might demotivate him.

Political influence:

The political system in Pakistan is immature and is in its early stages. In matters such
as police, courts, education services and in almost every department of life, political
officials, whose main role is to legislate laws for the country, are expected to support
the people. Likewise, they also intervene in tax-related matters. In order to ease the
tax criminals, they manipulate the tax machinery and assist in escaping from tax net
or punishments.