ISLAMABAD: The country’s tax-to-GDP ratio fell to 4.4% in the first half of FY 2022-23 from 4.8% during the same period last year, a fiscal operations report by the ministry of finance said on February 8.
Amidst the fiscal crisis, the debt servicing-to-GDP ratio for the first half of the current fiscal year also paints a bleak picture. Domestic servicing-to-GDP ratio is touching 2.7%, up 0.7%, and international debt servicing-to-GDP ratio is at 0.4%, up 0.2%. The jump in the percentage of domestic debt servicing was caused by increased borrowing, which stands at Rs 1.98 trillion, to finance the fiscal deficit, compared to last year’s Rs 1.58 trillion in the same period.
On the other hand, the non-tax revenue-to-GDP ratio remains unchanged at 1.1% compared to the same period last year. This figure has been backed by the surplus profit earned by the State Bank of Pakistan of Rs 378 billion and Rs 179 billion raked in via petroleum development levy.
Authorities had already taken notice of the low tax generation and taken action to increase tax revenue. On Tuesday, the Federal Board of Revenue (FBR) increased the standard sales tax from 17% to 18% by promulgating the Tax Laws Amendments Ordinance, 2023. As per reports in local news outlets, the promulgation was to start on February 9, but Profit reached out to the FBR and received no comment on this as of yet.
Similarly, on Tuesday the Supreme Court also ordered that 50% of Super Tax imposed earlier by the government be collected within a week. The Super Tax is a 10% tax on 13 sectors including steel, banking, cement, cigarettes, chemicals, beverages, liquefied natural gas (LNG) terminals, airlines, textile, automobile, sugar mills, oil and gas, and fertilizer.
Such measures are being taken to meet the cash surplus target of Rs 800 billion set by the IMF, of which only Rs 101 billion has been generated as of now.