Low tax-to-GDP ratio: inequality in taxation system major cause: IMF official

The Inter-national Monetary Fund (IMF) has said that Pakistan has to move towards an equitable tax system for increase in the tax-to-GDP ratio as inequality in taxation system is one of the major causes of low tax-to-GDP ratio in the country.
Speaking at the 2nd Day of Annual Conference of Pakistan Society of Development Economists (PIDE) here on Wednesday, IMF Islamabad Mission Chief Paul Ross drew attention towards disparity in the taxation system in Pakistan and said that some people have been paying more taxes and some are not paying.
There is need to move towards a more equitable taxation system to increase tax to GDP ratio, he said, and added that both the Centre and the provinces need to make concerted efforts to raise the tax-to-GDP ratio, as many subjects now rest with the provinces and decision would come from them, whether to bring them under the tax net or not.
He said that about 95 percent tax is being collected by the federal government and only five percent by the provinces. The centre and provinces have to increase savings by raising tax-to-GDP ratio, not only for investment in health and education sectors but also to protect the macro-economic indicators against external shocks. State Bank of Pakistan (SBP) Governor Shahid H Kardar said that the economic team, whose he is also member, has been trying to convince the political leadership on reformed general sales tax (RGST), which is a progressive tax.
He said that contribution to tax by the provinces has been very low, and tax on agriculture income and property is meagre, which can not be justified. "It is unacceptable and totally inequitable tax system at provincial level that can not be justified", he said, urging the provinces to increase the tax level. The provinces continue to argue that tax on property is their prerogative, and complain about encroachment by the federal government on their right to tax, but have not contributed to revenue collection. He also cited his own example, saying that he was paying disappointingly low less than one dollar tax on property measuring 1200 square yards, which was not justifiable.
Dr Hafiz Pasha said that intra-regional disparities in Pakistan, as compared to other regional countries, have declined but there is compelling evidence that disparities within the provinces have witnessed an increase, particularly in Punjab and Sindh.
However, he said, after the fiscal decentralisation, provincial finance commissions have done a great job to minimise intra-regional disparities. Pasha said that the contribution of property tax of all the four provinces is less than 0.1 percent of the GDP, and needed to be increased by bringing the sector into the tax net.