- $400 million project for robust tax mobilisation
While inflation is approaching former finance minister Asad Umar’s predicted ‘people screaming’ levels, the country’s economy, characterised by crippling uncertainty, lies in the doldrums, and prices of everyday use commodities have spiked sharply due to Ramadan, the government is still hopelessly lethargic and confused in its key economic decrees. The sudden personnel changes of the governor state bank and the federal board of revenue chairman have partially stalled due to second thoughts about the latter, and no notification forthcoming. Making well-pondered moves after ice-cold reflection is not the PTI government’s forte. Hopefully, but still with fingers crossed, the month of May would end the manifold ‘maybe’s surrounding the economy, with an IMF bailout package, a new documentation-friendly Tax Amnesty Scheme and of course the announcement of the annual budget set for May 25, or thereabouts. The decisions and policies spelled out this month will have immense future implications.
To assist Pakistan in overcoming one of its major fiscal handicaps, the absurdly narrow tax base in the world’s sixth populous nation, the World Bank is financing a comprehensive Pakistan Revenue Mobilisation Project (though not for the first time, an earlier attempt having failed due to our shortcomings). It will be to the tune of $400 million, in a bid ultimately to simplify the taxation system, restructure FBR through a transformational roadmap, make it semi-autonomous, modernise it by introducing information and communications technologies (ICT) and improve overall detection of tax evasion. Though the tax collection has improved from 9.5 per cent of GDP in 2011-13 to 13 per cent of GDP in FY17-18, it is still short of the minimum 15 per cent required to cover expenditures, especially for financing investment in human capital and infrastructure. The WB finding states that by following a broad base-low rate tax formula, Pakistan would not need to raise existing taxes or impose new ones, and its revenue can even reach 26 per cent of GDP, but the small print is that tax compliance must be raised to 75 per cent as presently less than 50 per cent tax is being collected. Other areas needing revisiting are multiple tax exemptions, dicey withholding-tax collection, frequent policy changes, legal loopholes, and federal-provincial government coordination, among others. But, in our work environment, easier said than done.
