LAHORE: International Growth Centre (IGC) released a video according to which salary incentives for tax collectors in Pakistan could significantly increase the amount of taxes raised in country.
A short video by IGC, “Taxing Pakistan: How to motivate civil servants”, shows results of a ‘pay for performance’ scheme that was tested in Punjab with Excise and Taxation Department by leading economists from Harvard University and Massachusetts Institute of Technology.
IGC funded economists found incentivizing urban property tax collectors increased the amount of tax collected by 30-40 percent. Public satisfaction in the work of tax collectors was not affected and the increased revenue was more than the amount paid for the reward scheme.
Tax collection in Pakistan is very low, even compared to other developing countries. Pakistan’s tax revenue is just 9 percent of its Gross Domestic Product, compared to a 15 percent average across developing countries and 40 percent across developed countries. This has led to a shortage of funding for public services such as education, healthcare and sanitation.
In Punjab, Excise and Taxation Department depends on tax collectors who spend much of their time in the field directly determining what needs to be taxed. Without incentives these tax collectors have suffered from low motivation and productivity. This has undermined the government’s tax revenue.
Dr Adnan Qadir Khan Research and Policy Director at IGC said, “When people do not get enough services they do not want to pay revenues to the state, and the state cannot provide those services because it does not have enough revenue”. One of the researchers Dr Benjamin Olken Professor of Economics at MIT said that overall the pay for performance scheme worked.
