Pakistan’s tax to GDP ratio has increased to 8.9 percent during previous financial year 2013-14 from 8.5 percent mainly due to the Federal Board of Revenue (FBR)’s collection of Rs 2266 billion.

“As far as revenue collection is concerned FBR has collected 2,266 billion as provisional collection during the outgoing fiscal year 2013-14 as against Rs 1,946 billion during 2012-13. Thus, a positive growth of 16pc has been attained. As a result, the Tax GDP ratio has enhanced to 8.9pc from 8.5pc which itself a significant indicator of the government reform agenda. However, the target of Rs 2,275 billion has been achieved to the extent of 99pc”, stated the FBR Biannual Review, January-June, 2013-14.

The report further stated Pakistan’s economy continues to encounter multifaceted challenges during the past year, viz challenging law and order in the country, energy shortages and compression of imports. However, with the best efforts, FBR has been able to collect provisional tax revenues of Rs.2,266 billion during the year 2013-14, yielding 16pc growth over the collection of Rs 1,946 billion collected during 2012-13.

Meanwhile, the revenue target for FY 2014-15 has been fixed at Rs 2,810 billion. The required growth is 24pc over the actual collection of FY 2013-14. In absolute terms Rs 544 billion additional revenue will be collected in 2014-15, the Review stated.

Talking about the economy, the Review said that undoubtedly, Pakistan’s economic growth over the past many years has suffered a number of setbacks; worsening security situation and crippling energy crisis. However, a number of deep structural problems that have persisted for decades are also to be blamed; the country weak financial position rooted in low tax revenues on one hand and limited export growth on the other; grossly insufficient investment in human capital development, infrastructure and economic activity at large. While external shocks have also adversely affected the economic performance. The noticeable decline in the rate of growth is a consequence of policy choice. The long term annual growth rate appears to have declined and at present is just 4 percent.

“Pakistan has to focus on resource mobilisation efforts. There is broad agreement amongst the economists that in a situation like Pakistan a steady rising tax to GDP is the best guarantee of viable fiscal adjustments and sound finances - a desired goal that has been missed for decade” said the Review.

It may be recalled that FBR was allocated an ambitious target of Rs 2,475 billion for FY: 2013-14. The target was based on the assumptions that FBR revenue collection would be Rs 2,050 billion during 2012-13 (Base year) and high trajectory growth of macroeconomic indicators forecasted for FY 2013-14. On the contrary, the base year collection stood at Rs1,946 billion. Thus, the revenue base was eroded by Rs 104 billion. The correction was made accordingly and the target was reduced to Rs 2,345 billion and further corrected to Rs 2,275 billion during the year.

The break-up of total collection of Rs 2266 billion made in achieved last financial year, the FBR had collected Rs 884.1 billion as direct taxes, Rs 1002.1 billion as Sales Tax,  Rs 139.1 billion as Federal Excise Duty and Rs 241 billion as Customs duty. Meanwhile, the FBR had paid Rs 104.8 billion as refund.