29 Nov 2023 By Know Muslim
The World Bank projects that Pakistan's tax-to-GDP ratio will increase to 9% by 2025, up from the current 6.1%. This is a significant increase, and it would represent a major step forward in Pakistan's efforts to broaden its tax base and improve its fiscal sustainability.
There are a number of factors that are contributing to this projected increase in tax-to-GDP ratio. One factor is the government's efforts to crack down on tax evasion. The government has introduced a number of new measures to identify and prosecute tax evaders, and these measures are starting to bear fruit. Another factor is the government's efforts to improve tax administration. The government has invested in new technology and training for tax officials, and this is making it easier for businesses to comply with tax laws.
The increase in tax-to-GDP ratio is expected to have a number of positive benefits for Pakistan. It will help to reduce the government's budget deficit, and it will also free up more resources for investment in infrastructure, education, and health. Additionally, the increase in tax-to-GDP ratio will make Pakistan more attractive to foreign investors.
However, there are also some challenges that Pakistan will need to address in order to achieve its target tax-to-GDP ratio. One challenge is the large informal economy in Pakistan. The informal economy is estimated to be as large as the formal economy, and it is a major source of lost tax revenue. The government will need to find ways to bring the informal economy into the tax net.
Another challenge is the corruption in Pakistan. Corruption is a major obstacle to tax collection, and it will need to be addressed if Pakistan is to achieve its target tax-to-GDP ratio. The government will need to take strong action against corruption, and it will also need to build public trust in the tax system.
Despite the challenges, the World Bank is optimistic that Pakistan can achieve its target tax-to-GDP ratio. The increase in tax-to-GDP ratio would be a major achievement for Pakistan, and it would have a number of positive benefits for the country.
Here are some specific World Bank projects that are helping to increase tax-to-GDP ratio in Pakistan:
- The Tax Administration Strengthening Program (TASP) is a project that is helping the government to improve tax administration. The project is providing training for tax officials, and it is also helping the government to introduce new technology to improve tax collection.
- The Pakistan Revenue Automation Project (PRAP) is a project that is helping the government to automate tax collection. The project is developing a new IT system that will make it easier for businesses to pay taxes online.
- The Large Taxpayer Unit (LTU) is a unit of the Federal Board of Revenue (FBR) that is responsible for collecting taxes from large businesses. The LTU is working to improve tax compliance among large businesses, and it is also working to identify and prosecute tax evaders.