Pakistan likely to miss tax-to-GDP target

LAHORE: Pakistan will miss the target for tax-to-GDP ratio of 17 percent by 2015 set by the United Nations in its millennium development goal (MDG) by a huge margin, Taxation expert Naeem Akhtar Sheikh said on Saturday.
Tax-to-GDP ratio in Pakistan has varied from 9-11 percent in past 10 years and it was 10.5 percent in 2013-14. While the tax to GDP ratio is 17.7 percent in India, 15.3 percent in Sri Lanka, 17 percent in Thailand, 14.4 percent in Philippines, 32.5 percent in Turkey and 26.8 percent in South Korea.
In Organisation for Economic Co-operation and Development (OECD) countries the average tax to GDP ratio is 35 percent as higher tax to GDP ratio enable the governments to serve the public effectively.
Sheikh said various taxation experts have pointed out deficiencies in the tax collection system and recommended setting up an independent revenue body comprising highly qualified experts and reputed professional auditors. The present Federal Board of Revenue (FBR) and its human resource lack the capability to reform into a buoyant revenue collecting authority. Because, Pakistan has an absence of tax culture and many experts ignore that, he added.
Many people love Pakistan but they do not trust the government, which is one reason for absence of the tax culture and is evident by the research conducted by World Values Survey, he said and added that the results of this survey show that tax to GDP ratio in those countries is healthy where people trust the government, bureaucracy and judiciary.
According to the survey, 58.9 percent Turkish expressed confidence in their government compared with 54.2 percent Indians, 51.1 percent Thai citizens and only 35.8 percent Pakistanis.
Where a confidence level below 50 percent shows that the level of confidence in the politicians is poor, he added.
In bureaucracy the approval ratings were 57.4 percent in Turkey, 68.7 percent in India, 56.9 percent in Thailand, 65.8 percent in Philippines and only 37.3 percent in Pakistan. The trust in bureaucracy was slightly higher than the trust in politicians but still extremely below the desired level, he said.
The level of confidence that the Indians show in their bureaucracy has paid India rich dividend in economic field.
For judicial system ratings the survey revealed that 68.2 percent Turks showed trust compared with 69.4 percent Indian, 71.8 percent Thai, 65.8 percent in Philippines and 45.8 percent in Pakistan.
Though, the level of confidence in judiciary in Pakistan was much higher than that in politicians and bureaucracy but it was still lower than 51 percent, he concluded. The tax expert, however, assumed that with little effort a lot of improvement is possible in Pakistan.
He said on the question of willingness to fight and die for the country 77.5 percent Turk citizens showed this commitment compared with 68.5 percent Indians, 82.2 percent Thai citizens, 82.5 percent Philippines and 88.2 percent Pakistanis.
He said people can be convinced to pay taxes provided the confidence level in the institutes is restored by better governance.
‘Only reforming the Federal Board of Revenue will not resolve the issue as the reforms are also needed in bureaucracy and politics,’ the expert added.