ISLAMABAD: The Federal Board of Revenue (FBR) has successfully increased the tax to gross domestic product (GDP) ratio in last three years. This milestone has been achieved by dint of strengthened tax administration, reduced tax concessions /exemptions and others measures and strategies to improve the business climate
GDP is one of the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value of all goods and services produced over a specific time period; you can think of it as the size of the economy.
The tax-to-GDP ratio is the ratio of tax collected compared to national gross domestic product (GDP). Some countries aim to increase the tax-to-GDP ratio by a certain percentage to address deficiencies in their budgets..
A well placed source at FBR told Customs Today that tax to GDP ratio was 9.8% in 2012-13 and it had been increased to 12.4% of GDP during 2015-16. In this regard, domestic resource mobilization strategy helped in achieving higher revenue growth and tax to GDP ratio in recent years.
Similarly, the source said that higher revenue growth achieve by FBR also led to low inflation, low interest rate environment and it enabled the government to further reduce cost of the domestic debt portfolio thus resulting in significant savings to the economy.
Therefore, the source said that Federal PSDP gradually increased from Rs. 348.3 billion during 2012-13 to Rs.800 billion for 2016-17, showing a cumulative increase of over 129%. The expansion of credit to private sector helped in improving financial conditions of the corporate sector and a general uplift in business environment in the country.
Resultantly, the source said that national economy continued to maintain growth momentum above 4.0% for the 3rd year in a row with real GDP growing at 4.71% in 2015-16 which was the highest in eight years.