KARACHI: Pakistan could easily double its tax-to-GDP ratio by integrating digital systems to collect taxes, said economist Yusuf Nazar at Karachi Press Club on Saturday.

He said the country can improve its existing tax-to-GDP ratio to 22 per cent from the existing 11pc within two years if an integrated digital system was launched to collect taxes by linking it with financial institutions and corporate sector entities.

Mr Nazar was speaking to a panel of journalists at a press conference held under the auspices of Ittehad Organisation headed by Justice Wajihuddin.

The economist said that 90 countries have already implemented electronic filing and tax payment systems. As a first step, the government can convert CNIC as tax registration number and link the same with financial system. Once the digital tax regime or integrated digital system is linked with financial system, at the end of each year all interest or dividend paying institutions would automatically be communicating total amount of such payments.

He warned that no state can survive with a weak economy and this trend can only be reversed with better tax to GDP ratio. Research also shows that once tax to GDP ratio crosses the 15pc threshold; it provides a platform for investment.

The economist suggested that in order to ascertain correct mailing address of taxpayers, banks should be restrained from delivering cheque books, debit cards or such instruments over the table. The government should mandate delivery of such instruments through post and this critical step would ensure that the addresses provided by individuals are correct. The proof of address is commonly used to prevent money laundering and tax evasion the world over.

Yousuf Nazar opined that this measure would also lessen country’s issues with the Financial Action Task Force (FATF) and discourage parallel economy which has grown unchecked and remains out of the tax net.

In order to curtail corruption in the tax collecting machinery, the discretionary powers can be checked by centralising the assessments and correspondence on a central portal maintained by the FBR.

He asserted that with more than 50 million bank accounts and around 150m mobile phone users in the country, there is no reason as to why tax to GDP ratio could not be doubled to 22pc.

Briefly speaking on rising budget deficit, Mr Nazar said it can be brought down by Rs500 billion (1.2pc of GDP) by reducing tax exemptions which stand at around Rs280bn, cutting Federal Public Sector Development Programme by Rs150bn, increasing agriculture income tax collection from Rs100m only to Rs30bn and reducing interest rates by 0.6pc as it will help reduce debt servicing by Rs10b.

Published in Dawn, September 30th, 2018