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REASON OF LOW TAX TO GDP RATIO IN PAKISTAN - Airians

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									   REASON OF LOW TAX TO
   GDP RATIO IN PAKISTAN


       GROUP NO 2
FATIMA-TU-ZAHRA
SARAH MASOOD
USMAN TAHIR SHAH
SIDDIQUE HASAN RIZVI
SHOAIB SAMDANI
    What does Tax to GDP mean???
  The ratio of tax collection against the national gross
                domestic product (GDP).

 Some states increase the tax-to-GDP ratio by a certain
 percentage in order to cover deficiencies in the state
                   budget revenue.

In states where the tax revenue has gone up significantly,
  the percentage of tax revenue that is applied towards
   state revenue and foreign debt is sometimes higher.
                     Tax to GDP ratio

Pakistan’s overall tax-to-GDP
ratio has remained stagnant at
around approximately 10-11%
and, infact has shown a decline
in recent years. Today Pakistan
has a lower tax-to-GDP ratio
than other Asian countries like
•   Sri Lanka (15.3 percent)
•    India (17.7 percent)
•    Indonesia(12percent)
•   Malaysia(15.5 percent)
•    Thailand (17 percent)
•    Philippines (14.4 percent)
•    South Korea 16 percent
Economic Survey of Pakistan
  Reason to lower tax rate to GDP
• The loss of growth momentum of the economy,
  especially of large-scale manufacturing and imports,
  which constitute the primary tax bases in the
  economy.
• To revenue losses resulting from the ongoing tax
  reforms in the country during the decade of the 90’s,
  especially the process of trade liberalization which
  has involved major reductions in statutory rates of
  import tariffs.
  Reason to lower tax rate to GDP
• There has been a systemic decline in the
  quality of tax administration and in the face of
  growing evasion and corruption; it is argued
  that the incidence of taxes has effectively
  declined.
• The implication of the tariff reforms is a major
  decline in the tax-to-GDP ratio exemption of
  agriculture income
• Tax collectors are corrupt
               According to FBR

• Floods and power shortage have vastly affected the
  resource mobilization efforts.

• Growth in gross domestic product (GDP) is mainly due to
  food inflation whereas food items are exempted from
  taxes; therefore, the inflationary impact could not be
  captured.
            According to FBR
               REASONS

  There has been 24% increase in agriculture
sector the size of GDP has increased accordingly
   but this sector is exempted from taxes, so
   increase in agriculture sector could not be
          materialized in tax collection
        Recommendation
A low per capita income reflects unequal
      distribution of income and high
  unemployment. Indirect taxes have an
adverse effect in a country where there is
unequal distribution of income, so in case
   of Pakistan direct tax base should be
 increased rather than indirect as there is
    more income inequality in Pakistan.
        Recommendation
    Tax collection requires consistency in
     implementation and consistency in
    implementation comes with political
                    stability
     Taxes and law and order situation is
indirectly related. A country with stable law
  and order situation would mean greater
  investment being brought in, more jobs
      being created, resulting in greater
    purchasing power on the part of the
consumers who effectively have to pay tax
       Recommendation

Awareness to the people on the benefits
 of paying taxes which increase the tax
morale of the people should be brought
      as long run policy implication.
       Recommendation

    Government must ensure that the
  taxation system is fair by doing away
 with all kinds of exemptions allowed to
certain powerful lobbies, pressure groups
 and associations and help reduce the
     burden on common tax payers.
        Recommendation

In Pakistan the Universal Self Assessment
   scheme has not shown the desired
  results because of lack of tax culture
and effective and comprehensive audit
to create limitation for the tax payers, so
   it must be backed by strong audit.
       Recommendation

Improvement in direct tax administration
 and collection be made corresponding
  with countries having high tax to GDP
                  ratio.
                   Conclusion
Pakistan’s low tax-to-GDP ratio is because of some success
               and some failure in tax reform.

 It appears that the country has been able to only partially
compensate for the loss of revenue resulting from the trade
  liberalization process initiated almost two decades ago.

  In particular, the country lost an historic opportunity for
 achieving a significant jump in tax revenue in a period of
      fast economic growth during the last decade.

 While arguing that a breakthrough in tax mobilization until
and unless we achieve a high GDP growth rate is ambitious
  the paper concludes that continued effort at resource
 mobilization can yield some success even in a period of
                  economic slowdown.
Thank you!!!

								
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