Provinces must step up tax collection, federation to cut spending: FBR chairman

Chairman of the Federal Board of Revenue Rashid Langrial said on Sunday that provinces would need to make greater efforts than the federal government to raise tax revenues, citing a widening provincial revenue gap, while also calling for restraint in federal expenditure.

Speaking at a panel discussion during the Afkaar-e-Taza Thinkfest held at the Alhamra Arts Centre, Langrial said economic growth remains central to improving tax collection at all levels of government. He recalled that under the 2009 National Finance Commission award, both the federation and the provinces had agreed to raise Pakistan’s tax-to-GDP ratio to 15%. Under that framework, he said, provinces would need to contribute around 2.5 percentage points, with the remaining 12.5 percentage points collected by the federation. If the ratio were raised to 18%, provincial contributions would need to increase to about 3%.

Langrial said provinces rely primarily on services tax, agricultural income tax and property tax, but collection from these sources remains low. He noted that property taxes contribute around 5% of GDP in Malaysia, 3% in Indonesia and 2% in India, compared with about 0.8% in Pakistan.

Highlighting disparities in urban tax collection, he said per capita property tax collection in Karachi stood at Rs111 last year, compared with Rs11,233 in Bengaluru. In Lahore, per capita collection was Rs623, while Chandigarh collected Rs1,276.

He said the weak provincial tax effort reflected limited pressure from the federation and stressed the need for discussions on structural and NFC-related issues, including the federal government’s role in funding small provincial projects.

Langrial said improved enforcement measures had already yielded results, citing the installation of monitoring cameras at sugar mills, which he said generated an additional Rs60 billion in tax revenues. He added that these funds were transferred to provinces and used for development spending.

Referring to Punjab’s Suthra Punjab initiative, he said local service delivery had improved, including daily cleaning in rural areas, underscoring the link between public spending and visible outcomes.