ISLAMABAD, June 11: The tax-to-GDP ratio has declined to 9.3 per cent during the outgoing fiscal year of 2003-04 from the 9.6 per cent of last year, says the Economic Survey.

The Survey says that the tax revenue in relation to GDP has remained stagnant at 9-10 per cent during the last five years. The decline in tax-to-GDP ratio calls for a greater deal of effort to widen the tax base to mobilize additional resources to bring this ratio at par with other countries, which were more or less at the same levels of economic development stage.

According to the report, the wide-ranging tax and tariff reforms as well as reforms in the tax administration had started paying dividends. During the last five years, tax collection has increased by 65 per cent and the overall fiscal deficit, which averaged almost 7 per cent of the GDP during the 1990s has been reduced to 3.3 per cent in the year 2003-04 (of new GDP).

The revenue deficit has been narrowed from 3 per cent of GDP to 0.2 per cent, which will increase national savings and thus reduce the country's dependence on foreign savings to finance domestic investment.

The share of direct taxes in total taxes has increased from 18 per cent in 1990-91 to 32 per cent in 2003-04. Accordingly, the share of indirect taxes declined from 82 per cent in 1990-91 to 68 per cent this year.

Further break up of indirect taxes showed that customs duty, which used to account for 45 per cent of total tax collection and 55 per cent of indirect taxes in the year 1990-91 has now been reduced to 17 per cent and 25 per cent, respectively during the period under review.

The share of sales tax during the period increased dramatically from 14.4 per cent to 43 per cent of total taxes and from 17.6 per cent to 62.5 per cent during the year 2003-04. Central excise duty as a tax is losing its importance and gradually being faded out.