Pakistan had tax expenditure equal to 2.8 percent of the gross domestic product (GDP) and India had an expenditure of 0.4 percent of their GDP.
According to the tax expenditure report-23 issued by the Federal Board of Revenue (FBR), many small and emerging economies give tax concessions and exemptions.
The tax expenditure was more than 4 percent of GDP in Brazil and South Africa while it was close to 7 percent in Colombia. Pakistan and India appear at the lower tail of this distribution.
The report added that throughout the World, most countries provide concessions, exemptions, and tax relief on certain products and segments of society. There is a large variation in tax expenditures across countries.
Mostly, advanced countries report significantly higher estimates of revenue forgone. According to the “Global Tax Expenditure” data for 2019 and 2020.
Russian Federation provides a huge size of tax exemptions, that is, 14.8 percent of their GDP. In the US, income tax expenditure constitutes 6.6 percent of GDP. Similarly, the government tax revenue gets reduced by around 8 percent of GDP in Australia.
Canada, Japan, and the UK also allow tax expenditure up to 6.6 percent, 7.5 percent, and 8.1 percent of their GDP.
The revenue forgone or tax expenditure in European countries is relatively close to the world average of tax expenditure (around 4 percent of GDP).
Finland and Netherlands are exceptions, where tax expenditures are 12 percent and 12.8 percent of their GDP, the tax expenditure report–23 added.
