ISLAMABAD, Aug 24: The government has decided to increase tax-to-GDP ratio from existing 14 per cent to 20 per cent by 2006 to largely improve its fiscal deficit and manage substantial funds for poverty alleviation.

Official sources told Dawn here on Saturday that each year there will be one per cent increase in the tax-to-GDP ratio. All efforts will be made to achieve this one per cent increase in tax during the current financial year.

According to a senior official of the ministry of finance, a beginning has been made to achieve one per cent increase in tax-to-GDP ratio as the month of July has shown 20 per cent revenue increase.

Nonetheless the IMF was seeking 24 per cent increase in the tax-to-GDP ratio to manage the country’s growing expenditures. The World Bank is believed to have supported the IMF over the issue by saying that CBR’s reforms were critically important to achieve this objective and that there was a need to achieve on priority the restructuring of the Central Board of Revenue (CBR) by removing deadwood and corrupt elements from the organization.

The Bank has also called for initiating serious process of accountability in the CBR to remove huge leakages and considerably enhance revenues.

But the sources said it will take a “very long time” to manage 24 per cent tax-to-GDP ratio as it required continuous reform process and that real task would start when the new elected government takes over as a result of October general elections.

Although President Gen. Pervez Musharraf has said that he would personally make sure that reform process continued beyond October this year, and that nobody will be allowed to undo or reverse this process, sources said that nothing could be predicted about the future.

“Our experience shows that conflict starts immediately when the political government gets power from any military regime,” a source said adding that reforms relating to CBR were considered the most crucial by the international donor agencies, and that they would monitor this issue even after October this year.

The sources said a first step has been taken by the government to increase revenues as more branches of the National Bank of Pakistan were being designated for the collection of receipt of tax returns. Also a policy of tenured based appointments of CBR officers were being adopted to ensure continuity and avoid frequent changes that delay resolution of tax disputes.

Similarly, all audit procedures, audit schemes and audit reports were being given to the taxpayers. Consignment of goods examined by customs or excise staff in a factory or whorehouse will not be re-opened for record examination at Karachi port or at ports.

The sources said that the officials of the CBR had been directed to compile a full account of all its notifications, general orders, rules and circulars in a printed form and make them available to public, which will also be periodically updated.

“The government’s undertaking given to the IMF that Rs460 billion revenue collection target for 2002-2003 will not be revised downward and will be achieved at all costs, signifies that we are all for gradually increasing tax-to-GDP ratio considerably,” a source said.