Islamabad: A newly released report from the World Bank reveals that the Pakistani economy suffers tax losses of Rs3.2t annually which have been attributed to poor administration and non-compliance on part of tax-payers.
The report cited that Pakistan’s potential tax capacity is approximated at 22.3pc of the gross domestic product (GDP), which converted at current market price stands at Rs7.2t. And the projected tax to GDP ratio for financial year 2016-17 ending this Friday stands at Rs3.9t or 12.5pc.
The tax gap has been computed at Rs3.2t or 9.8pc of GDP. WB said that due to reforms, revenue mobilization from the lowest of baselines had shown marked improvement. It added; that the tax to GDP ratio has steadily increased from 2013-14 base-line of 10.5pc to 12.5pc in 2015-16.
The report highlighted that in order for the country to meet its 2020 target of 14.5pc tax to GDP ratio and reduce the tax gap, it would require to initiate long-term reforms in the realm of tax administration. This report was prepared for the approval of a $5m project named “Mobilise Domestic Revenues by Strengthening Tax Systems as Development Tools and Building Tax Policy Analysis Capacity.” The financing is being given as a grant via the World Bank by the Department for International Development of the United Kingdom.
This $5m project is aimed at the setting up of tax intelligence units, intervention and market monitoring units, improving information management systems and facilitating the preparation of analytical reports on a continual basis.
