Member of the Institute of Revenues Rating and Valuation and Public Finance Accountant, Patrick Kevin Doherty has said that there is a gap between the revenues and expenditures of the Punjab government which was continuously increasing, as in 2000- 2001 total resources of the Punjab government were 110.47 billion and the expenditures were 107.93 million with a financing gap of 2.54 percent.
While in 2008-2009 total resources were Rs 320.45 billion and the total expenditure was Rs 418.86 billion with a financing gap of 98.41 percent. He stressed the need of bridging the gap between revenues and expenditures. He was delivering a lecture on "Tax reform in the Punjab: Challenges And Opportunities " organised by the Center for Public Policy & Governance (CPPG) Forman Christian College Lahore on Thursday.
He is currently working with the Punjab Government on a number of projects involving finance and local taxation. Patrick said that only higher public revenues can finance enhanced public spending. He said that Pakistan, when compared to its regional neighbours has one of the lowest tax to GDP ratios, which is currently 8.9 percent, which should be enhanced to 11.3 percent. He also said that people should pay taxes when they were given incentives.
Patrick said that the provincial tax collection has not grown in line with the inflation. He said that unfortunately unrealistic tax collection targets were set by the provincial government. He said that tax collection can be increased in the Punjab by increasing the number of property tax payers. He said that Punjab has the population of 80 million and approximately around there were 11 million properties were in Punjab out of which if we take out properties of poor people then there will be 3 to 5 million properties could be included in the tax net and at present only 1.2 million properties were in the tax net, which could be doubled with proper planning.
While appreciating the reforms by the Pakistan government in the institutional -re organisation and the capacity building of the Federal Board of Revenue he said that such type of reforms should be adopted by provincial tax departments. He suggested reforms relating to agricultural taxation in Provincial Board of Revenue, reforms in provincial Excise and Taxation department and reforms in the devolved local government institutions.
He said that the tax reforms are necessary in provincial tax revenue departments because they face weak fiscal situation. He suggested faster implementation of structural reforms to strengthen revenue mobilisation. He also said that it is often considered that tax base is eroded it is because of legal tax avoidance and illegal tax evasion. He said that effects of erosion of tax base are loss of tax revenues, cost of administration is increased and the horizontal and vertical equity also suffers. Patrick said that there is a lack of clear, consistent approach in the formulation of tax policy, no research and development, lack of institutional policy development capacity and requires a Policy Support Unit.