Economic managers identified that tax revenues are the most efficient and effective way to increase country’s local resource mobilization and under the attempts the state increases its income to meet compulsory public expenditures. They also mention that it supports the government in growing its capacity to direct the resources for development, reducing poverty and delivering public services. However, to attain these objectives, it is significant to build an efficient, equitable and growth-oriented tax system.
Over the years, the Government of Pakistan has faced various political, economic and administrative issues along with inherent structural challenges, like a narrow tax base, huge tax evasion and administrative weaknesses in developing a well-organized tax system. Consequently, it failed to enhance tax collection necessary to create enough fiscal space essential for infrastructure, education, healthcare and social assistance in Pakistan.
Many research studies revealed that until FY2015, the overall tax-to- GDP ratio varied between 9.1 and 11.0 percent of GDP, however, by FY2016 overall tax collection as percentage of GDP enhanced considerably and stood 12.6 percent of GDP. Significant increase in total tax collection during FY2016 is largely attributed to enhanced collection under GDS (Gas Development Surcharge), GIDC (Gas Infrastructure Development Cess) and Petroleum Levy. The collection under these heads scaled up on account of higher sales of oil and gas products. Of total tax revenue, Federal Board of Revenue (FBR) tax collection as percentage of GDP has also recorded an extraordinary improvement and reached at 10.7 percent of GDP in FY2016. The improvement in FBR tax-to-GDP ratio has been on account of substantial reduction in tax concessions and exemptions, increased WHTs on non-filers of income tax returns and improvements in tax compliance and enforcement.
Presently the Government of Pakistan decides to improve to Rs4.5 trillion the revenue collection target also a cut in income taxes in the new federal budget for the new fiscal year 2018-19. It is said that FBR has been tasked to prepare the first draft of tax relief and revenue measures by the end of this month. The present government has already set April 27 for the announcement of budget 2018-19. Different sources in Pakistan mention that FBR is working on various proposals to support 15 percent growth in revenue collection in 2018-19. These initiatives would also take into consideration impact of GDP growth and inflation in the country.
The Federal Board of Revenue predicts to collect almost Rs3,900 billion by the end of this fiscal year 2017-18, which will be about twice of the tax revenue since 2013.
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Economic experts have also mentioned that the Government of Pakistan has imposed 20 new WHTs since June 2013 while raising the rates for non-filers on the pretext of enhancing tax compliance. The number of WHT categories has increased to 56 from 36 since June 2013. Resultantly WHT equals over 70 percent of total direct taxes. Other potential areas where taxes will be increased include regulatory duties on non-essential and luxury products/items. Furthermore, the FBR has also revealed various products, which imports have surged because of free or preferential trade agreements, for imposition of regulatory duties. It is hoped that the predicted depreciation of the rupee in the upcoming fiscal year (2018-19) may also lead to higher revenue collection.
Economic experts also mentioned that the tax authorities are also working on three proposals, growing exemption limit, falling tax rate for individual taxpayers and introduction of simplified return form. It is proposed to improve the basic income tax exemption limit to a minimum of Rs500,000, from the existing Rs400,000 for the salaried class. Currently, the highest income tax slab of 35 percent was applicable to income of individual taxpayers.
| FBR TAX COLLECTION (Million Rupees) | ||||||
|---|---|---|---|---|---|---|
| Period | Direct Taxes | Indirect Taxes | Total | Total Tax Collection | ||
| Sales | Excise | Customs | ||||
| 1949-50 | 90 | 0 | 39 | 319 | 358 | 448 |
| 1959-60 | 303 | 270 | 248 | 357 | 875 | 1,178 |
| 1969-70 | 958 | 522 | 1,890 | 1,240 | 3,652 | 4,610 |
| 1979-80 | 5,333 | 2,410 | 9,701 | 12,572 | 24,683 | 30,016 |
| 1989-90 | 15,642 | 18,574 | 21,433 | 48,584 | 88,591 | 104,233 |
| 1999-00 | 112,950 | 116,711 | 55,784 | 61,659 | 234,154 | 347,104 |
| 2009-10 | 525,977 | 516,348 | 124,784 | 160,273 | 801,405 | 1,327,382 |
| 2010-11 | 602,451 | 633,357 | 137,353 | 184,853 | 955,563 | 1,558,014 |
| 2011-12 | 738,424 | 804,899 | 122,464 | 216,906 | 1,144,269 | 1,882,693 |
| 2012-13 | 743,409 | 842,528 | 120,964 | 239,460 | 1,202,952 | 1,946,361 |
| 2013-14 | 877,255 | 996,382 | 138,084 | 242,810 | 1,377,276 | 2,254,531 |
| 2014-15 | 1,033,720 | 1,087,790 | 162,248 | 306,220 | 1,556,258 | 2,589,978 |
| 2015-16 | 1,217,474 | 1,302,371 | 188,055 | 404,572 | 1,894,998 | 3,112,472 |
| 2016-17 | 1,344,226 | 1,328,965 | 197,911 | 496,772 | 2,023,648 | 3,367,874 |
| FY 2018 | ||||||
| Jul/17 | 69,603 | 90,007 | 7,304 | 39,648 | 136,959 | 206,562 |
| Aug/17 | 84,885 | 97,208 | 11,017 | 44,132 | 152,357 | 237,242 |
| Sep/17 | 132,435 | 126,900 | 17,335 | 44,364 | 188,599 | 321,034 |
| Oct/17 | 92,200 | 119,129 | 12,163 | 47,067 | 178,359 | 270,560 |
| Nov/17 | 101,673 | 108,278 | 14,793 | 49,207 | 172,278 | 273,951 |
| Dec/17 | 192,956 | 149,004 | 20,579 | 58,197 | 227,780 | 420,736 |
| Source: SBP | ||||||
Conclusion
No doubt, in Pakistani poorest of the poor pay taxes while the rich whose total contribution to overall tax revenue does not exceed 5 percent, enjoy special rights or privileges and a concessionary regime under the country’s unethical tax structure. The elite, just like Pakistan’s powerful personalities, should be made to pay taxes.