ISLAMABAD, April 8: The World Bank has urged Pakistan to increase revenue mobilization further to 18.3 per cent of the GDP by the year 2006-07 to adequately fund poverty-oriented expenditures. It believes that determined efforts are necessary to complete institutional and policy reforms especially the fundamental restructuring of the Central Board of Revenue (CBR) in the next few years to achieve the desired results.

The bank in its fresh report - Pakistan Public Expenditure Management (Strategic Issues and Reform Agenda) - says Pakistan's revenue mobilization has been low, both by international standards and compared with its potential. In financial years 1999-2000 and 2000-01 total revenue collection was the equivalent of 16.2 per cent of the GDP, tax revenue was only 13 per cent of the GDP and had actually stagnated for several years.

However, revenue collections during the last two years increased sharply to 17.9 per cent of the GDP in 2002-03 reflecting both the success of tax collection efforts and the revival of the economy.

The structure of taxation has also improved considerably in recent years and the heavy dependence on foreign trade taxes has been reduced. "Still revenue mobilization falls short of that many developing countries at comparable levels in Africa, Asia and Latin America," the report said.

In the light of the weaknesses in the current revenue mobilization system, there is a considerable scope for enhancing collection and broadening the income tax base. For instance, while there are only 1 to 1.5 million people who file income tax returns, there are 3 million cell-phone subscribers, over 10 million electricity consumers, 3 to 4 million gas consumers and 2 to 3 million car owners.

"In our view, it should not be difficult, in the light of current efforts, to increase revenue mobilization further to 18.3 per cent of the GDP by 2007, the assumption in the base case," the report said.

But the suggested level of revenue mobilization will merely regain the level of the early 1990s. In the area of tax policy, reforms should continue to aim at continuing to reduce the number of tax exemptions (for customs duties, income and withholding tax) and make sales taxation more effective.

Reforms, the report continued, are also needed for tax on income from financial and land assets. In particular, the current practice that allows a single personal to hold assets under different names (and more easily evade taxation) should be abolished.