I read with great interest the report titled, “Roadmap to Raise Tax-to-GDP Ratio Evolved: FBR Chief’ carried by Business Recorder on 28th November, 2025. The report outlines the Federal Board of Revenue’s (FBR’s) roadmap, which aims to raise Pakistan’s tax-to-GDP ratio from the current 10.33 percent to 18 percent.
The second paragraph of the said report has quoted the FBR Chairman as saying that “right now the tax to GDP ratio is 10.33 percent and the contribution of taxes from provinces is merely at 0.85 percent. He said that the FBR, through automation, digitalisation and track & trace system, planned to increase the tax ratio to 15 percent at the federal level, whereas the contribution of provinces has to be increased to 3 percent.”
It is important to note that historical data (Fiscal Operations figures available at Finance Division’s website) shows a significant increase in the provincial tax-to-GDP ratio over time. In FY 2010-11, the ratio had stood at 0.36 percent, which rose to 0.85 percent in FY 2024-25, witnessing an increase of 136 percent. In contrast, however, the federal tax-to-GDP ratio has shown only a modest growth, rising from 9.05 percent in FY 2010-11 to 10.33 percent at present, reflecting a meagre increase of just 14.14 percent.
As regards Chairman FBR’s statement that “contribution of provinces has to be increased to 3 percent”, I would like to highlight that if the FBR’s aforesaid statement implies a rise of 3 percent (over the ratio of 0.85 percent) this implicitly demands an unprecedented 250 percent increase, which seems over-ambitious and impractical.
On the other hand, if it means an increase by 3 percent of the current base of provincial tax receipts, the increase will be negligible and inconsistent with the stated overall target for achieving 18 percent in the national tax: GDP ratio. It is noteworthy that the FBR’s contribution plan to increase Federal tax to GDP ratio to 15 percent as compared to the existing ratio of 10.33 percent requires an increase of only 45 percent, which is not consistent with the projected/required increase of 250 percent in Provincial tax: GDP ratio. Without further explanation of the underlying reforms and growth assumptions, these numbers appear aspirational than achievable besides being discriminatory against the growth of tax collection expected from the Provinces.
For public understanding and to maintain credibility of the reform agenda, it would be appropriate for FBR to clarify the methodology behind these projections particularly as to how provincial contributions have been calculated and whether the increases are in absolute percentage points or relative growth.
Javeria Siddique (Karachi)
Copyright Business Recorder, 2025
Comments
Comments are closed for this article.