ISLAMABAD, May 27: The revenue collection will register a growth of 0.3 per cent of GDP every year during the Medium Term Development Framework (MTDF) 2005-10 because of initiation of reform process in the tax administration. With this growth in revenue realization, the tax-to-GDP ratio will increase to 10.5 per cent by the year 2009-10, from nine per cent during the year 2004-05. The absolute revenue collection will increase to Rs997 billion during the year 2009-10, from the current expected revenue realization of Rs590 billion by end of the current year.
The MTDF report released here on Friday suggested that the growth in revenue would be materialized owing to enhancing of taxpayers’ confidence on the tax collection machinery, bringing change in the duty drawback system, refund procedures, good governance and introduction of automated taxation system.
The report projected a revenue collection target of Rs649.5 billion for the year 2005-06, Rs719.5 billion for the year 2006-07, Rs801.4 billion for the year 2007-08, Rs894.2 billion for the year 2008-09, and Rs997 billion for the year 2009-10, respectively.
Furthermore, the tax-to-GDP ratio was projected at 9.3 per cent for the year 2005-06, 9.6 per cent for the year 2006-07, 9.9 per cent for year 2007-08, 10.2 per cent for the year 2008-09, and 10.5 per cent for the year 2009-10.
The report says the total tax revenue collected by the Central Board of Revenue are estimated to rise at an annual compound growth rate of 11.1 per cent and of these taxes, the highest growth of 12.7 per cent is projected for sales tax followed by direct taxes with 12 per cent, custom duty with 7.3 per cent, and central excise with 5.6 per cent.
A relatively higher growth projection of sales tax among indirect taxes would be chiefly the outcome of taxation strategy of expanding the VAT variant. Similarly, high growth projection for direct taxes primarily hinges on tax reforms to enlarge the tax net, plug tax loopholes and improve the tax administration.
These tax reforms will be implemented by the CBR under its “Tax Administration Reform Programme (TARP) being funded by the World Bank at the cost of Rs9.501 billion.
For monitoring the reform process, the government had constituted a high-powered Cabinet Committee for Federal Revenues (CCFR) headed by the finance minister three years back. Interestingly, no formal meeting of the body has held so far.