Pakistani Government is about to levy ‘flood tax’ on the people of Pakistan, to meet its expenses for reconstruction of infrastructure after suffering from severe destruction from floods. This tax will increase the income tax of an individual by 10%. The government has decided to impose 2% flood tax on all imports. About Rs 150 billion is estimated to be generated by implementing the ‘flood tax’. These proposed taxes would be implemented for the current and next fiscal year (2010-2011 and 2011-2012). The Pakistani officials are discussing the above two measures with IMF officials and once finalized and passed by the cabinet, these will be imposed.

This proposal of flood tax imposition might result into creating many controversies, as a small portion of tax payers will be affected seriously. On the other hand, there is no plan to stop wide spread tax evasion in the country.  About of 1% of the Pakistani population pays income tax and a majority of business people and landowners are still out of tax net.

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