Govt hopeful of raising tax-to-GDP ratio to 13.9% in next three years

It also forecasts to raise the revenue-to-GDP ratio to 14.6% by 2021-22, including FBR collection and revenue from other sources


KARACHI: Over the next three years, the government anticipates raising the tax-to-GDP ratio to 13.9% from existing 11.6% via a variety of fiscal measures, sources revealed on Tuesday.

According to government projections, the ratio of the tax regulators collection to the GDP at 11.6% during the current financial year 2018-19 against 11.2% in late FY18, reports The News.

It projected the existing year’s tax to GDP ratio based on a revenue collection target of Rs4.55 trillion, which analysts say is impossible to attain for the tax authorities.

However, official documents indicate the government forecast to raise the revenue collection to Rs8 trillion by 2021-22, with increasing revenue collection target to Rs5.82 trillion in 2019-20, Rs7 trillion in 2020-21.

It also forecasts to raise the revenue-to-GDP ratio to 14.6% by 2021-22, including FBR collection and revenue from other sources.

As per sources, the forthcoming measures would promote ease of doing business and rationalize duty and taxes.

In FY18, revenue collection was recorded at Rs3.84 trillion and the government is expecting to push it up by 18.42% to Rs4.55 trillion for current FY19.

And sources in the FBR stated the current years’ revenue collection target is Rs4.39 trillion and will be difficult to attain since less than half of the amount was collected during July-Jan of FY19.

The government has established a framework to boost revenue collection, said sources.

And it is mulling drastic cuts 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 tax regime by getting rid of special procedures and reduced rate taxation.

Moreover, it is considering a move to a single tax collection agency with a single return and single auditing authority to decrease compliance costs over the next three years.

Also, revision of administrative structures, business processes and efficient dispute resolution mechanism will be undertaken.

On the ease of doing the business front, the government is considering the decreasing number of taxes and ensure all payments be made electronically.

Consequently, this will help in decreasing the time needed to obtain value-added tax refunds.