Team Members: Muhammad Zeeshan
Though various sources can be tracked to raise the level of national exchequer, national tax base remains most important. The Pakistan Muslim League Nawaz (PML-N), while having majority in the federal government plans to increase tax to GDP ratio up to 15% which is currently 9% and has been declining over time. Pakistan has a workforce of 58 million out of which only 2 million are registered taxpayers. Monetizing the potential 3.2 taxpayers can provide additional tax financing to the development programs.
The creeping reform process in the Federal Board of Revenue (FBR) is also a big hurdle. If this institution still believes in its current passive strategy, it needs around 32 years to target the potential tax payers. To identify the hidden tax payers, the National Database and Registration Authority (NADRA) should facilitate the FBR department which is very difficult otherwise.
The alternative financing mean which is the tax financing in the present case becomes very important especially when the PML-N government seems divided over a proposed increase in gas tariff presented by Mr. Shahid Khaqan Abbasi, the Federal Minister for Petroleum and Natural Resources. However, the limited options provided by the International Monetary Fund (IMF) may not allow government to suspend the gas price rise as the government is supposed to collect around PKR100 billion under the IMF programs.
A number of factors in political economy do not allow the government to raise the gas prices. The textile and industrial sectors both claim that the proposed rise in gas tariffs would not allow them to take benefit from the Generalized System of Preferences (GSP) by the European Union. In addition, the CNG sector is afraid that such a rise would throw various CNG stations out of the business. All these factors may give benefit to the Pakistan Tehreek-e-Insaf (PTI) in the local government elections scheduled in the end of January. On the other hand, the government is under severe pressure as it is already facing criticism over the past rise in electricity prices.
Web Link: http://economicaffairs.com.pk/energy-taxation-and-political-economy-of-pakistan/