By Abdul Wajid Khan ISLAMABAD, April 19 (INP-WealthPK): The Federal Board of Revenue (FBR) said that Pakistan Raises Revenue (PRR) program will contribute to a sustainable increase in domestic revenue by broadening the tax base and facilitating compliance, and it will help increase tax-to-GDP (gross domestic product) ratio to 17% by financial year 2023-24. According to a working paper of the FBR, a copy of which is available with WealthPK, under the program, by financial year 2023-24 the number of active tax payers will be increased to 3.5 million. Likewise, the time needed to facilitate taxpayers’ compliance (hours required to pay income tax, sales tax and file returns) will be reduced to 130 hours from 253.5 hours (40 hours for income tax and 213.5 hours for general sales tax), while average hours spent for customs clearance at borders will be decreased to 48.5 hours from 97.5 hours. The PRR program is a five-year investment project financing (IPF) operation with disbursement-linked indicators (DLIs) that has two components: first, result-based component, and second, traditional IPF component in information and communications technology (ICT). It includes supply and installation of ICT equipment and software and consulting and non-consulting services for software development and technical assistance. The total estimated cost of the project is $400 million of which $320 million has been allocated for component-i and $80 million for component-ii. The program was signed on June 19, 2019 between the World Bank and the Government of Pakistan and currently it is being implemented by the FBR. The program will be completed by June 2024. So far, under the program, funds have been utilised in instalment of fire-eye security forensic services for cyber security and ICT networks, and hiring of consultants/experts for several functions including public relations, audit, IT, monitoring and evaluation and cyber security. These measures are bringing tangible improvement in the FBR’s substantive and procedural functions at strategic and field levels and it has seen an average increase in revenue to the tune of 30%. Although the FBR has shown strong growth and registered a 29.1% increase in tax revenue from July-March 2021-22, this collection is still far below its real potential. The Asian Development Bank (ADB) in its recent report on ‘Mobilizing Taxes for Development’ highlighted that well-defined and comprehensive reforms in tax policy and administration was needed for Pakistan to tap the huge potential of increase in its tax revenue to around 26% of GDP. The report said that if implemented in a sustained manner, tax reforms can pave the way for realizing Pakistan’s tax potential and providing greater fiscal space to fund critical public services. Recent studies by the International Monetary Fund (IMF) and the World Bank (WB) on Pakistan’s tax gap estimated that tax revenue could potentially reach 22.3% to 26.0% of its GDP. According to the World Bank, PRR addresses a fundamental challenge for Pakistan’s development prospects: a chronic shortfall of revenues. No government can function if most of the country’s people and businesses do not pay their taxes. Pakistan collects less in taxes than what it needs to cover the government’s main service delivery functions. This resulted in budget deficits, a growing public debt burden, and acute shortage of funds to invest in country’s infrastructure and human capital. Pakistan has a very narrow tax base. This is due to exemptions and concessions for some large economic sectors and industries, including agriculture, construction and textiles. Likewise, a lot of tax revenue is lost due to widespread tax evasion. The PRR also supports the simplification of the tax system by financing targeted measures aimed at reducing the burden of the withholding regime on firms and individual taxpayers. It will help maximize transparency about the costs and benefits of tax exemptions. Importantly, the PRR will help by harmonizing tax collection principles and mechanisms across the federal government and the provinces. The PRR supports the FBR to become a high-performing organization based on best practices and technology that have demonstrated results across the world. To apply these technologies and practices successfully, the FBR needs to align its internal structure with its functions such as taxpayer registration, tax assessment, arrears management, audit, and litigation. A function-based structure will enable the FBR to achieve efficiency gains by simplifying and automating the processes for each function.