The federal government plans to increase tax revenue for the fiscal year 2020-21. The government intends to increase revenue by 25%. And intends to improve its tax-to-GDP ratio.
Taxes are essential for a strong economy. With the high collection, the funds could be utilized for the betterment of a country.
The federal government is of the view to stabilize political disagreements, increase tax revenues, and achieve a better GDP.
However, the tax-to-GDP ratio for Pakistan remained as low as 9% for the FY 2019-202. While the tax-to-GDP for the year 2017-18 was 11.1%. The reason behind this includes; underperformance by FBR, and an increase in the corruption level.
According to experts, Pakistan’s tax structure is not very efficient. For instance, indirect taxes means abnormal tax revenue. The indirect taxes are usually applied on international trades which, apparently, seems unjust by the traders. And this led to the illegal trade of goods to save taxes.
Further to the experts’ opinion, the tax collection methods are outdated, follow complex laws and a rising percentage in tax rates.
Like any other country, Pakistan’s tax system is highly sensitive to the tax laws, political stability, tax collection procedures, foreign aid, literacy level, reliance on a single major industry, and external debt.
Unfortunately, all have been in place effecting the tax-to-GDP ratio badly. One of the key factors to overcome this weakness is to move towards political stability. Once all the major political parties stand on one ground, only then the rest of the determinants could be managed properly.
While the government showed its interest to increase the tax revenue, the Peoples Democratic Movement (PDM) announced an anti-government protest starting 11th October.