Govt envisages tax-to-GDP ratio of 13.9pc over three years

KARACHI: The government envisaged to take the tax-to-GDP ratio to 13.9 percent over the next three years from the current 11.6 percent through a score of fiscal measures, sources said on Tuesday.

The government estimated the ratio of the Federal Board of Revenue’s (FBR) collection to the GDP at 11.6 percent during the current fiscal year as opposed to 11.2 percent in the last fiscal year. It estimated the current year’s tax to GDP ratio at a collection target of Rs4.55 trillion, which analysts believed appears impossible for the tax authorities.

Official documents showed that the government projected to increase the revenue collection to Rs8 trillion by 2021/22 with increasing revenue collection target to Rs5.82 trillion in 2019/20 and Rs7 trillion in 2020/21. Similarly, the projection for tax-to-GDP ratio is 12.7 percent in 2019/20 and 13.6 percent in 2020/21.

The federal government also projected to increase revenue-to-GDP ratio to 14.6 percent by 2021/22. including FBR collection and revenue from other sources.

The sources said the upcoming measures would promote ease of doing business and rationalise duty and taxes.

Revenue collection for the fiscal year of 2017/18 was at Rs3.84 trillion and the government is expecting to raise it by 18.42 percent to Rs4.55 trillion for the current fiscal year.

The FBR sources said the current year’s revenue target is Rs4.39 trillion and it is difficult to achieve as less than half of the amount was collected during the first seven months of the current fiscal year.

The sources said the government evolved a roadmap to enhance revenue collection to the desired level. The government planned drastic reduction in tax expenditures by removing exemptions and excessive tax credits from incomes tax, sales tax and federal excise duty laws and moving to a single sales tax regime by doing away with special procedures and reduced rate taxation.

The government also planned to move to a single tax collection agency with single return and single auditing authority to cut compliance costs during the next three years.

A revision of business processes, administrative structures and efficient dispute resolution mechanism will also be made. The efforts will be coupled with taxpayer education and facilitation by developing android apps for filing of returns and tax payment.

On ease of doing business, the government planned to reduce number of taxes and ensure that all payments should electronically be made. That will also reduce time required to obtain value added tax refunds.

The sources said there is also a plan to reduce customs-related processing time at Karachi port by 50 percent and reduce hours required to prepare export and import documents by more than 50 percent.