ISLAMABAD: The World Bank (WB) has said that every Pakistani citizen evaded tax amounting to Rs 4800 in the year 2007-08, while the total tax evaded in the period stood at Rs 796 billion.The World Bank’s Pakistan Tax Policy Report 2009 revealed this — Tapping Tax Base for Development released on Saturday.
The report has been jointly prepared by the Federal Board of Revenue (FBR) and the Andrew Young School of Public Policy, Georgia State University.
The report said a large tax gap in the country suggested that the tax system was likely to under perform in terms of revenue, efficiency, equity and administration.
The federal tax gap in Pakistan for 2007-2008 estimated in the report is around 79 percent of the actual tax receipts.
In 2007-08, total tax revenue collection stood at Rs 1.1 trillion or 10.3 percent of the GDP.
It said there is a broader consensus that the country’s tax system under performed as it had a narrow base, with taxes being levied on a limited number of sectors, businesses and individuals.
The WB report also said it feared that when the fiscal pressure began to ease, tax reform pushback would be in full swing. “Even modest reform proposals to curb tax exemptions and tax evasion will come under fire and the government will be subject to pressure to back down and return to business as usual,” it said.
Such meagre revenue would leave the government with little options to cover its targeted expenditure, with the result that the government would invoke unsustainable budget deficits or major cuts in spending, which in turn would make it impossible to maintain social and infrastructure sector-spending at the level required for development, the report added.
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The tax policy report said structural tax policy reforms outlined could produce substantial revenue increases for the government.
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