SIFC aims to double Tax-to-GDP ratio

The Apex Committee of the Special Investment Facilitation Council (SIFC) approved on Friday a strategic plan aimed at doubling the nation’s tax-to-GDP ratio from the current 8.5% to 18% by 2029.

The target was set during the committee's 9th meeting, where members committed to a sustainable annual growth of 1.8% in the tax-to-GDP ratio to achieve this goal. 

A World Bank research report indicates a 10% import duty could boost domestic sales profits over exports by an average of 40%, addressing Pakistan's persistent balance of payment crises linked to its low export volume. 

These challenges are exacerbated by insufficient taxation on agricultural income, urban property, and retail sectors, alongside a fragmented tax system that encourages investment in urban properties over export-oriented sectors. 

The agricultural sector, contributing nearly a fifth of the GDP, remains notably undertaxed, contributing less than 1% to national tax revenue. 

The existing tax system's complexity, with its divided value-added tax (VAT) system and the requirement for nationwide firms to navigate multiple tax jurisdictions, further complicates compliance.

Additionally, the tax code is riddled with exemptions costing the country substantial revenue, which also creates systemic distortions.

In response to these challenges, the federal cabinet approved a restructuring of the Federal Board of Revenue (FBR) on January 30, 2024, including the establishment of a reconstituted Federal Policy Board (FPB) led by the finance minister.

Customs and Inland Revenue departments would be separated and work under specific director generals in the relevant cadres who would also enjoy complete authority over the administrative, financial and operational matters. 

Both officials would ensure digitisation of their relevant departments and the implementation of globally recognised practices for transparency and addressing complaints. 

These departments would have separate oversight boards with the federal secretaries of ministries from finance, revenue, trade, chairman NADRA and relevant experts as its members whereas, minister for finance would head them.