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Govt plans to jack up tax-to-GDP ratio up to 5pc

Govt plans to jack up tax-to-GDP ratio up to 5pc

ISLAMABAD: The PML-N led government plans to jack up tax-to-GDP ratio in the range of 3 to 5 percent over next 36 months under IMF’s bailout package of $6.6 billion.

The Federal Board of Revenue (FBR) has finalised broadening the tax base with the blessing of political leadership under which stringent measures will be taken to nab tax dodgers. Finance Minister Ishaq Dar has given green signal to FBR for moving ahead with iron hand against those who found involved in tax evasion. But it is yet to see how the PML-N government takes tough actions against its own voters as tax evasion basically prevails at major urban centres where Nawaz Sharif enjoys popular support.

The tax-to-GDP ratio, which fell below 9 percent of GDP, in the last financial year 2012-13 as FBR’s tax collection nosedived to Rs 1942 billion against the initially envisaged target of Rs 2381 billion, witnessing a shortfall of Rs 439 billion.

FBR in its whole history never witnessed such a massive revenue shortfall and it will have to achieve 28.4 percent growth in the current fiscal year for materialising the desired target of Rs 2475 billion by end June 2014.

“Under the broadening of tax base exercise, FBR has sent 10,000 notices to potential tax dodgers last month (July 2013) and another 15,000 notices will be sent during the ongoing month,” a senior FBR official said.

By end September 2013, FBR plans to send 40,000 to 50,000 notices to potential dodgers with the purpose to generate demand of billions of rupees and then efforts would be made to maximise revenue collection in months ahead.

“The newly-appointed Chairman FBR Tariq Bajwa has also focused upon effective monitoring of withholding taxes, plugging leakages on account of input adjustments of sales tax, curbing under-invoicing and over-invoicing and controlling smuggling to maximise revenue collection and achieving the set target of Rs 2475 billion by end of the ongoing financial year.