This study is descriptive, qualitative and analytical in essence. The research includes study of various research journals, research reports, and papers, reports of the FBR, IMF, WB, SBP and OECD and newspaper articles. The study relies upon the data of the WB for ratios of different economic indicators of India and data of FBR and Ministry of Finance on figures of tax collected and various GDP percentages.
Organization of Paper
Introduction to this study emphasizes role of taxes in fiscal policy and tax amnesty as quick source of tax revenue. It also highlights various aspects related to tax amnesty schemes.
This paper has three Sections. The first Section depicts situation analysis of overall tax base of Pakistan and an overview of tax culture, impact of cultural variations in tax compliance and formulation of tax compliance strategies
Section II explains salient features of major tax amnesty schemes introduced in the last decade in India and Pakistan.
Section III makes a comparison and analysis of amnesty schemes discussed in Section-II in terms of its effectiveness.
The paper then concludes the discussion followed by policy recommendations.
GDP of Pakistan and Tax Culture
1.1 GDP of Pakistan and Tax- GDP Ratio
Gross Domestic Product of Pakistan has increased by 200% over the last decade from 12 Rs. trillion in 2008-09 to Rs. 36 trillion in 2018-19. The table below depicts GDP growth rate over the period of ten years:
Table 1: Pakistan’s GDP & Growth Rate
|Year||GDP Growth Rate|
|Source: Economic Survey of Pakistan 2008-2009 to 2018-2019|
The above-tabulated position indicates that GDP had experienced a sharp decline in FY 2008-2009. It then grew gradually to 5.79% in FY 2017-2018 and again fell to 3.29% in 2018-19. The sectoral share in GDP of Pakistan over the last decade is as under:
Table 2: Sector wise Share in GDP (at constant basic prices) %age
|Source: Economic Survey of Pakistan 2018-2019|
The tax- GDP ratio measures revenues in comparison to GDP. More the ratio, more the fiscal space for growth, and lesser the fiscal deficit and vice versa. A picture of Pakistan’s tax & GDP is given in the table below:
Table 3: Tax-GDP Ratio (As % of GDP)
|Year||Revenue||Tax revenue||Non-tax revenue|
|Source: Economic Survey of Pakistan 2017-2018 &2018-19|
The data tabulated above shows that in FY 2013-2014 tax-to-GDP ratio was at 10.2%, which increased to 12.6% in FY 2015-2016, but fell to 12.4% in FY 2016-2017. For 2018-2019, it stands at 13.9%%. Compared to other neighbouring countries, Pakistan’s tax – GDP ratio is relatively low. Comparison is available in the following table:
Table 4: GDP Ratios
|Source: Pakistan Raises Revenue Project – World Bank Report|
The low tax-GDP ratio reflects poorly on tax administration and its efforts in the enhancement of tax base of the country which shows that neither strict enforcement measures are taken nor culture of tax compliance has been developed in Pakistan. Consequently, the country looks for a short term documentation and revenue generation measures such as Tax Amnesty Schemes.