ISLAMABAD: Pakistan’s tax to GDP ratio likely fall to 11 percent as losses due to coronavirus lockdown on tax revenue has been estimated at around Rs1,023 billion in current fiscal year.
The tax to GDP ratio was actually estimated at 12.8 percent for tax year 2019/2020. However, it is projected at 11 percent after the coronavirus pandemic locked down the economic activities.
The tax to GDP ratio increased to 12.9 percent in fiscal year 2017/2018. However, it eased to 11.6 percent fiscal year 2018/2019 due to election year and overall economic slowdown.
Total tax revenue has been estimated at Rs4,633 billion for current fiscal year as it was actually projected at Rs5,656 billion for the fiscal year under review.
The tax collection by the Federal Board of Revenue (FBR) has been projected at Rs3,908 billion for the current fiscal year after coronavirus outbreak hampered tax collection efforts.
The pre-coronavirus FBR’s revenue collection was estimated at 4,803 billion for the current fiscal year. It means the pandemic causes around Rs895 billion revenue losses for the current fiscal years.
The FBR’s tax to GDP ratio has been estimated to fall at 9.3 percent from pre-Covid19 projection of Rs10.9 percent.
The FBR’s tax to GDP ratio increased to 11.7 percent in 2017/2018. However, in the tax year 2018/2019 it fell to 10.6 percent due to election year and economic slowdown.
According to International Monetary Fund (IMF), Pakistan’s forecasts are subject to higher than usual uncertainty, economic activity is expected to contract for the first time since the 1950s.
“Real GDP is projected to decline by –1.5 percent in
FY 2020 as a result of a severe contraction in output during the last quarter of the fiscal year.”
The IMF further said that the Covid-19 shock will unfortunately reverse the decline in public debt in recent months on the back of the authorities’ fiscal consolidation efforts.
“Instead, debt is projected to increase to around 90 percent of GDP in FY 2020, against 85 percent prior to the shock, both due to the sharp decline in growth and the increase in the budget deficit.”