FBR to Raise Tax-to-GDP Target With World Bank’s Assistance

The World Bank, in collaboration with the Federal Board of Revenue (FBR), has prepared a Reconstruction plan for tax collection machinery and anticipates a target to raise tax-to-GDP ratio to 15 percent from the existing 11.2 percent.

As per Business Recorder, The FBR Chairman Mohammad Jehanzeb Khan gave a detailed briefing to Finance Minister Asad Umar, who visited the Board’s headquarters and attended a two-hour briefing on Monday.

The sources told that the country’s overall tax-to-GDP ratio, including the provinces’ share as well as non-tax revenue, is aimed at to go up to 17 percent by the end of 2023. Out of 17 percent, the overall target of tax-to-GDP and the FBR’s share has been envisaged at 14.5 to 15 percent.

According to the report, the FBR’s tax-to-GDP ratio stood at 11.2 percent of GDP so efforts will be made to increase this ratio up to 13 percent by the end of June 2020. FBR’s share in tax-to-GDP ratio will be increased up to 15 percent in last year of PTI government’s tenure.

Sources said that FBR’s restructuring plan will be implemented in phases and the first summary will be moved next month.

The tax-to-GDP ratio has remained stagnant for the last many years and all efforts made by the governments in the last 10 to 20 years have failed to yield any results.

Sources said that taxpayers had to deal with five tax machineries in Pakistan, including the FBR and four provincial revenue authorities of each province that wasted a lot of time for honest taxpayers.

The balance between income tax and sales tax is a dire need of the hour for using each other’s data to expand the tax base and revenue collection up to the real potential of the country. Although, the Inland Revenue System (IRS) deals with both income tax and sales tax but using data for expanding the base and collection still needs to be done to make FBR an effective revenue collection agency.

The usage of IT can provide solutions at cheaper rates and the government intends to utilize technology for the purpose of expanding the narrow tax base in months and years ahead.

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