Pakistan to Boost Tax-to-GDP Ratio

May 15, 2012 Taxation in Pakistan

Pakistan to Boost Tax-to-GDP RatioISLAMABAD – Tax authorities in Pakistan will initiate a new projects to raise tax collections, and are aiming to identify shortcomings in the tax system and to improve tax compliance in the country.

On May 15th the Ministry of Finance of Pakistan and National Finance Commission (NFC) held a joint working meeting in Islamabad, in which they discussed potential changes and improvements to Pakistan’s tax system. As an outcome of the meeting, it was agreed that the NFC, the Ministry of Finance, and the Federal Board of Revenue (FBR) of Pakistan would need to improve cooperation and enforce their joint efforts with the aim of increasing the national tax-to-GDP ratio to 15 percent by the end of 2015.

It was agreed that in order to boost national tax collections, Pakistan needs to further broaden its tax system, and tax authorities will now ascertain what changes can be made to the excise tax system, or which duties can be abolished, in order to remove inefficiencies which hinder economic development and bring in only minimal levels of tax revenues.

The FBR also revealed that it is currently compiling a new database of taxpayers, which will contain information that is currently held by different tax authorities and government departments of Pakistan, and will also include data obtained from third parties. It is believed that new data will aid the FBR in its tax investigations, audits and compliance enforcement efforts.

In order to determine what future tax changes would maximize tax revenues and with the aim of ensuring tax efficiency, the FBR is compiling economic data obtained from third parties to ascertain which sectors of the economy are the most active and which are the fastest growing.

Photo by Dave Dugdale