Pakistan' s persistent issue with a lack of a broad tax base and consistent tax avoidance has plagued efforts to raise revenues. In turn, the situation has led to widening fiscal deficits and increasing the debt burden on the government. Talking to WealthPK, Amjad Mahmood, an additional secretary at the Finance Division, emphasised that to counter this problem, the authorities have initiated the digitization of tax collection to avoid leakages in such a scenario where a large chunk of the national economy is still not documented. The Federal Board of Revenue has reportedly surpassed the third-quarter tax collection target for the ongoing fiscal year (FY24), raking in additional Rs3 billion in revenues. This is a significant step forward for the nation's financial situation.

Highlighting the gravity of Pakistan's tax base dilemma, the FBR disclosed in December that the country had a meagre tax base of approximately 5.2 million individuals in 2022, a stark figure considering Pakistan's population of 240 million.  In response, the FBR had set forth ambitious plans to expand the taxpayer base by adding 1.5 million new taxpayers during the current fiscal year. As Pakistan strives to navigate its economic woes, it faces the imperative of meeting a primary budget deficit target of Rs401 billion ($1.44 billion), equivalent to 0.4% of its gross domestic product, before the government presents its budget in June. Pakistan's economy has been marred by significant challenges, prompting concerted efforts to enact structural reforms aimed at stabilizing the economy. Notably, the country is operating under a $3 billion International Monetary Fund's short-term program, which was crucial in averting a sovereign default last year.

Talking to WealthPK, Nasheeta Maryam Mohsin, Special Secretary of the Finance Division, said that the accomplishment of exceeding the tax collection target was a clear reflection of Pakistan's commitment to strengthening fiscal stability and driving economic recovery and resilience in the face of significant challenges. "However, continuous efforts are required to address long-standing systemic issues and ensure uninterrupted progress in the country's fiscal dynamics," she added. She concluded with remarks that an economically feasible solution to the systemic issue is further efforts to digitalize and consolidate tax collection mechanisms and strengthen enforcement methods, while simultaneously expanding the tax base through greater incentive creation and awareness campaigns, thus paving the way for sustainable revenue generation and fiscal stability.

Credit: Independent News Pakistan