ISLAMABAD: The Federal Board of Revenue (FBR) Monday admitted that the country's tax-to-GDP ratio had declined to a historic low of 9.6 percent in 2019-20 as compared to 11.1 percent in 2017-18.

The FBR's projections of tax-to-GDP ratio for 2020-2021 have been fixed at 10.9 percent as compared to 9.6 percent in 2019-20.

According to the Revenue Division Year Book (2019-20) issued by the FBR here on Monday, the tax-GDP ratio has declined during the last two years; however, the decline in the FY 2019-20 has been lower as compared to the previous fiscal year.

It is hoped that with the boost in economic activities in the post-Covid period, the tax revenue would increase, which would lead to a higher tax-GDP ratio in the coming years, the FBR Year Book states.

Another to the FBR report (biannual review 2019-20) issued on Monday revealed that the overall tax-GDP ratio of Pakistan during the last five years remained between 11.4 percent and 12.6 percent.

The economic slowdown and particularly, the Covid pandemic has hurt the economic activities, and so, the tax collections.

The report said that the lower tax-GDP ratio implies that there are lesser funds with the government to enhance its development expenditures.

The FBR has projected 10.9 percent tax-to-GDP ratio in 2020-21; 11.6 percent in 2021-22, and tax-to-GDP ratio has been projected at 12 percent for 2022-23.

With this backdrop, the government realising the necessity to enhance the tax revenues required for economic development, healthy spending on education and research and poverty alleviation, etc, has initiated a reform programme in the revenue organisation.

There is a vital role of the FBR in the economic development of the country. The FBR collects more than 90 percent of the overall tax revenues, is trying to enhance its tax base and net, in order to increase its tax-GDP ratio with the scheme of reforms and enforcement.

There is a need to boost up the efforts and implement these reform measures for efficiency and sufficient raise in the FBR tax revenues. Sufficient tax revenues would help government fight poverty along with reducing the burden of public debt and dependence on borrowing from national and international sources, the FBR added.

Copyright Business Recorder, 2020