CBR role in economic uplift: 15.5 percent tax-to-GDP ratio targeted in next 10 years

The Central Board of Revenue (CBR) will gradually improve tax-to-GDP (gross domestic product) ratio to 15.5 percent in the next 10 years and in 2006-07, the ratio will improve by 0.3 percent.
Revenue Division General Secretary and CBR Chairman Abdullah Yusuf stated this in a talk on the "Role of CBR in the economic development of the country" at a joint 87th event of 21st Century Business and Economics Club (CBEC), Overseas University Alumni Club, 21st CBEC Women Forum and Pak-China Business and Economics Forum, here on Thursday.
He said that currently tax-to-GDP ratio was 10 percent and the CBR targeted 15.5 percent in the next 10 years. This would include Pakistan in the league of countries having ambitious tax-to-GDP ratio.
At present, there were about 1.6 million tax filers - about one percent of population - which did not reflect the real potential, he said, adding that the aim of the CBR was to improve the tax compliance and number of tax filers. He said that macro-economic indicator on positive side and international experts predicted that Pakistan had growth potential in next 20 to 30 years.
He said the CBR was collecting 90 percent tax of the country, which made it an important institution for the growth of the economy. Yusuf said that the role of the CBR was not visualised by the previous governments. In 2000, the government of President General Pervez Musharraf and Prime Minister Shaukat Aziz, who was then finance minister, thought about restructuring the revenue collecting authority. The government thinking was that everybody should come forward to save the country, he added.
"At that time, we were declared a terrorist and a bankrupt state. In this environment, the issue was given serious thought with view to moving into the future and getting economic growth on a faster track," he said. To accelerate economic activities, every effort was made, resulting in tariff rationalisation, which was exorbitantly high.
He said the CBR decided that no charge would be imposed other than five-percent custom duty at that time, although the government suffered loss in revenue collection. The government's aim was to reactivate the industry and for this the CBR sacrificed its quantum share in terms of revenue collection, he said, and added it brought positive results and investment started to flow into the country.
Several sectors had shown significant growth in this reform process, he said, adding that telecom, banking and oil sectors had shown tremendous growth. These three sectors were contributing almost 50 percent of the entire collection, but power sector could not produce desired results, he said.
In reform process, the CBR had started Large Taxpayers Unit (LTU) in Karachi and Lahore, while another would start in Islamabad soon. About 13 regional tax offices would be also set up in coming days. The idea was to provide service of income tax, sales tax and excise under one roof, he said.
In Customs, a pilot project was started at Karachi International Container Terminal and Port Qasim International Container Terminal for faster clearance, he said, and added that Self-assessment scheme was started in 2003 to remove hassles for taxpayers' facilitation. There were apprehensions from the tax department, but the project got extremely well. This resulted in growth of tax filers in 20 percent per year and 20 percent growth in revenue collection as well.
The CBR adopted international best practices, which suited our environment, he said. Automation was given importance making the entire tax system transparent. Five major sectors, which contributed 80 percent to the refunds, were being paid zero-rated to chopped off problems, he said.
He said that tax administration reform would be completed by December 2009. Yusuf said that litigation matters, which were pending in Supreme Court and High Courts for years, were also reduced.