The ‘Monthly Economic Update and Outlook’, recently released by the finance ministry’s Economic Adviser’s Wing, has anticipated that growth prospects for the economy could be marred by inflation going beyond 15 per cent and the prevailing inauspicious global environment.
It also mentioned several other macroeconomic factors that can positively or adversely impact the economy during the current fiscal year. However, the report did not mention our tax-to-GDP ratio, which I believe is one of the biggest determinants of economic growth.
The current economic team recently celebrated the Federal Board of Revenue’s (FBR) annual tax collection, which for the first time surpassed Rs6 trillion. However, it was not a matter of jubilation, but a time to reflect since the country’s tax-to-GDP ratio remains below 10pc. In stark contrast, Scandinavian countries boast a tax-to-GDP ratio of over 40pc, and the results are evident in their prosperity.
Now, let us just assume Pakistan’s tax collection jumps from under 10pc of GDP to, say, 25pc. We will have at least Rs10tr in additional tax revenue, which will enable the government to set aside a sufficient budget for health, education, infrastructure and industries, and thus give the economy a much-needed boost.
Therefore, the government should make a concerted effort to broaden the tax base as well as keep an eye on the taxes that are paid by people, but don’t reach the FBR kitty.
MUHAMMAD IQBAL BHATY
KARACHI
