ISLAMABAD: The Economic Survey of Pakistan for the outgoing fiscal year 2016-17 has acknowledged the remarkable role of the Federal Board of Revenue (FBR) in increase the revenue collection.
The survey paid hats off salute to the FBR by reporting that significant rise in total tax collection during FY2016 is largely attributed to improved collection under Gas Development Surcharge (GDS), Gas Infrastructure Development Cess (GIDC) and Petroleum Levy.
The collection under these heads scaled up on account of higher sales of oil and gas products. Of total tax revenue, the FBR tax collection as percentage witnessed a remarkable improvement and stood at 10.7% of the GDP in FY2016-17.
The improvement in the FBR tax to GDP ratio has been on account of considerable reduction in tax concessions and exemptions, increased withholding taxes on non-filers and improvements in tax compliance and enforcement.
The survey further highlighted that like many other developing countries, Pakistan’s tax structure is heavily reliant on indirect taxes. Nevertheless, in recent years, Pakistan’s tax structure has seen a great transition from indirect to direct tax system as a result of various tax reforms. In FY2006, indirect taxes constituted 68 percent of total FBR tax collection, while the direct taxes accounted for only 32 percent
The proportion of direct taxes in total FBR taxes has increased steadily to 39.1 percent in FY2016, whereas the share of indirect taxes has reduced to 61.0 percent during FY2016. During the current fiscal year, the share of direct taxes is expected to increase further to 43 percent on account of various tax measures initiated by the government.
The share of sales tax in total FBR tax collection has increased to 41.9 percent in FY2016 from 41.3 percent in FY2006. However, the share is likely to reduce to 39.7 percent during the current fiscal year.
On the other hand, the proportion of sales tax in total indirect tax has increased from 60.3 percent in FY2006 to 68.7 percent in FY2016. Sales tax as percentage of indirect tax is targeted to reach at 69.7 percent during FY2017.
In contrast, customs duty as percentage of indirect tax has reduced from 28.3 percent in FY2006 to 21.3 percent in FY2016, while its share is expected to reduce further to 20 percent during FY2017.
Similarly, excise duty as percentage of indirect tax has reduced to 9.9 percent during FY2016 from 11.3 percent recorded in FY2006 due to the shrinking base over the years. During FY2017, its share in indirect tax is expected to remain at10.3 percent.
Therefore tax revenues are the most efficient and effective way to boost country’s domestic resource mobilization efforts through which the state raises its income to meet compulsory public expenditures.
