TAX AS BUDGETARY TOOL FOR ECONOMIC GROWTH OF PAKISTAN

Tax as a budgetary tool for Economic Growth of Pakistan

TAX AS BUDGETARY TOOL FOR ECONOMIC GROWTH OF PAKISTAN

Submitted By:
M.Adnan Akram 20358

Submitted To:
SAJJAD ARIF

Bahria University Karachi Campus

Tax as a budgetary tool for Economic Growth of Pakistan

TABLE OF CONTENTS
Executive Summary Tax History of Pakistan tax Tax structure Budget Government Revenue Tax to GDP ratio Economic Growth Conclusion Appendix 03 04 05 06 08 09 10 13 15 17

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EXECUTIVE SUMMARY
Tax is charge against income of individual, association of person and company and is payable to government at the specified rates, which are described under law. Mainly there are to taxes direct and indirect. In Pakistan direct mean income tax and indirect means excise duty, custom duty and sale tax. Major portion of tax revenue come from sales tax. In 1990s the share of indirect in tax revenue was 80% and now it comes to 60 %
A government Budget is a document plan of public revenue and expenditure. Difference in revenue and expense is deficit, which is covered through loan. Pakistan facing budget deficit, since 1992, due to high expenditure and low income. Cause of high expenditure is subsidy, but the reason of low income in low tax collection. Government revenue comes from tax and non tax .the major portion of government revenue is tax collections. Tax collection is low as compare to government expenditure because a large population are tax evader and only 0.57% pay tax in Pakistan .due to low tax collection tax to GDP ratio goes down .as compare to other countries Pakistan has lowest tax to GDP ratio. Another main reason of low tax to GDP ratio is that 21% of the GDP is contributed by the agriculture sector, but in tax revenue its contribution is zero because income from agriculture or agriculture property is exempt from tax. And on other 54% of GDP is contributed by service sector but its contribution in tax revenue is low (26% in 2010) as compared to its contribution in GDP. growth in GDP is totally depend on the economic

situation of the country, as Pakistan is now dealing with terrorism, in result its expenditure are increases day by day. Pakistani currency is depreciate against dollar which increase the burden of loan interest payments and loan it self. Due to poor law and order situation in Pakistan, foreign direct invest decreases another main problem is shortage of electricity. In order to improve the economic growth, government should reform their tax structure just like implement tax on agriculture income, make tax registration and filling procedure easy, reduce the import by imposing tax, improve the export by making income from export tax free, get the tax from rich people by hook and crook, make tax collection department independent (no political interference),by making a strict law against corruption because corruption is on thing which damage the economic growth seriously.

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TAX
A tax (from the Latin taxo; "rate") is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law. The first known system of taxation was in Ancient Egypt around 3000 BC - 2800 BC in the first dynasty of the Old Kingdom. Purpose Main purpose of imposing tax is that it provides money. The money received in the name of tax has been used by the government to carryout many operations/functions, some of these includes, economic infrastructure, subsidies, and the operation of government itself. Governments also use taxes to fund welfare and public services. The main source of government revenue is tax collection. A portion of taxes also go to pay off the state's debt. Governments use different kinds of taxes and vary the tax rates. This is done to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as business, or to redistribute resources between individuals or classes in the population. Countries by tax rate Comparison of tax rates around the world is difficult and somewhat subjective. Tax laws in most countries are extremely complex.

country

corporate

individual min

individual max

VAT/SALES/GST

BANGLADESH INDIA CHINA PAKISTAN UK USA

45%-0% 30% 25% 35% 24% -20% 39-15%

0% 0% 5% 0% 0% 0%
From Wikipedia

25% 33% 45% 25% 45% 39.60%

15% 14.5% - 5.5% 17% 16% 20% 10.25%

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HISTORY OF PAKISTAN TAX

In Pakistan, there are two main tax charges applicable; INCOME TAX & SALES TAX At the time of independence, Income Tax Act of 1922: prevalent in undivided India was adopted by the Government of Pakistan as its Income Tax Law. Income Tax Ordinance, 1979 was the first law on Income Tax which was published in Pakistan from 1st July, 1979 by Government of Pakistan. To update the tax laws and bring country's law in accordance with international standards, Income Tax Ordinance 2001 was published on 13th September, 2001, which became effective from 1st July, 2002. INCOME TAX is chargeable as per Income Tax Ordinance which defines its scope, calculation & collection procedures. The last Income Tax Ordinance was issued in year 2001 & is now applicable along with its amendments (mainly at Budgets) and various other time to time pronouncements. Sales Tax was a provincial subject at the time of partition. It was being administered in the provinces of Punjab & Sindh as provincial levy. Sales tax was declared a federal subject in 1948 through the enactment of General Sales Tax Act, 1948 and in 1952; this levy was transferred permanently to the Central Government. Sales tax was levied at the standard rate of 6 pies per rupee at every stage whenever a sale was effected. The trading community protested against this system, and this resulted in the enactment of Sales Tax Act 1951. In the late eighties the government decided to replace Sales Tax with the Value Added Tax in the country as a part of its structural adjustment program which was undertaken to correct anomalies & distortions both in our tax & non-tax regimes. Accordingly new enactment titled Sales Tax Act 1990 replaced Sales Tax Act 1951 with effect from 1-111990. SALES TAX is a kind of a value added tax charged on Sales value at specified rate. Its Scope, charge & collection is executable as per Sales Tax Act 1990. Sales Tax is charged on certain activities by Federal Government while on few services/activities, the sales tax is being charged by relevant Provincial Governments (for Sindh, its Sindh Revenue Board). Income year starts in Pakistan from 1st of July of current year, and ends at 30th June of next year. After completion of income year, for individual, 3 months are given to file the tax return (30th September), and for AOP & company, 6 months are given to file the tax return.

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TAX STRUCTURE
Federal taxes in Pakistan like most of the taxation systems in the world are classified into two broad categories, viz., direct and indirect taxes. A broad description regarding the nature of administration of these taxes is explained below: Direct Taxes Direct taxes primarily comprise income tax, along with supplementary role of wealth tax. For the purpose of the charge of tax and the computation of total income, all income is classified under the following heads: Salary(monthly remuneration) Income from property(rent from house, property and machine) Income from business(trading, manufacturing, service) Capital gains(gain on disposal of capital asset) Other source(any income not cover in above heads)

Taxation according to a persons ability to pay is universally accepted principle, and income is considered a satisfactory although not a sufficient index of such ability to pay. Income Tax is, therefore, generally recognized as a highly fair form of taxation. A tax imposed on income neither can nor normally is shifted to others and thus its incidence is on those for whom it is intended. Since income tax is progressive in nature, it tends to reduce economic disparity. Tax rates and method of calculating taxable income varies with fiscal status of the tax payer. Following are the broad categories of taxpayers: Individual (biological person) Association of person (partnership, joint venture, Hindu undivided family) Company Indirect Tax Indirect tax increases the price of a good so that consumers are actually paying the tax by paying more for the products. Indirect tax is shifted from one taxpayer to another, by way of an increase in the price of the good. In Pakistan indirect tax include sales tax, custom duty, excise duty. A sales tax is a tax paid to a governing body for the sales of certain goods and services. Law allows the seller to collect funds for the tax from the consumer at the point of purchase. Customs duty is imposed on dutiable imports and Federal excise duty is levied at import and domestic stages. The composition of tax structure in Pakistan is shown in Figure-01. Indirect taxes are the major source of tax revenue. The share of indirect taxes was above 80% in the 1990-91 and the remaining 20% was contributed by direct taxes. The share of direct taxes in total tax revenue since then has increased gradually with a prominent upward change occurring in the 2007-08. The increase in the share of direct taxes from 18% to 40%,

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Tax as a budgetary tool for Economic Growth of Pakistan

however, was attributed to introduction of withholding tax regime .The share of indirect taxes has registered a decline of 20% over the past two decades. The gap between the direct and the indirect taxes slightly widened during 2006-07 to 2008-09 but again narrowed down after 2008-09.in 2011-2012 percentage share of indirect tax is 61.8 % and direct tax is 38.2 %. Withholding Tax Regime is a global phenomenon and in Pakistan the major source of the Federal revenue collected on national level. The collection as well as dependence on Withholding Taxes is on the rise over the years. Out of total Direct Taxes collection of Rs, 740(b) for financial year 2012 Rs, and 422(b) with percentage share of 57% came from various Withholding Taxes, which are characterized by their adjustable and presumptive nature.

FIG-01 : DIRECT AND INDIRECT TAX

90 80 70 60 50 40 30 20 10 0 1991 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 direct indirect

Based on table -1 in Appendix

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Tax as a budgetary tool for Economic Growth of Pakistan

BUDGET
A government budget is a document plan of public revenue and expenditure that is often passed by the legislature, approved by president and presented by the Finance Minister to the nation. Government Budgets are of three types: Balanced, Surplus and Deficit. The decade of 1990s experienced high fiscal imbalance (fig-02). However, the fiscal deficit started declining during the period 2002-03 to 2006-07 primarily because of (i) rescheduling of foreign debt of US$ 12 billion that brought down the debt servicing from 42.4percent in 2000- 01 to 22 percent of the revenues in 2005- 06 (ii) huge flows of foreign grants that increased non-tax revenues and inflows from CSF. Nevertheless, fiscal deficit moved up to 7.6 percent of GDP during 2007-08 for the reasons: (i) rising oil and commodity prices; (ii) decision of the Government to subsidize rising oil and commodity prices; (iii) lower revenues and (iv) higher expenditures because of substantially increased subsidy bill. The fiscal deficit has declined from 7.6 percent in 2007-08 to 5.9 percent in 2010-11 on account of reduction in development expenditure. The massive floods in 2010 and 2011 have put an enormous strain on public finance due to the unexpected expenditures to meet the rehabilitation and reconstruction needs and resulted in the upward adjustment in the fiscal deficit target from 4 percent to 4.7 percent of GDP.

FIG-2 : FISCAL DEFICIT AS PERCENTAGE OF GDP

9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0

1993

2005

1992

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2006

2007

2008

2009

2010

2011

Based on table-2 in Appendix

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Tax as a budgetary tool for Economic Growth of Pakistan

GOVERNMENT REVENUE
Government revenue is revenue received by a government. It is an important tool of the fiscal policy of the government and is the opposite factor of government spending. Revenues earned by the Government are received from sources such as Taxes levied on the incomes and wealth accumulation of individuals and corporations and on the goods and services produced, exported and imported from the country, Non-taxable Sources such as Government-owned corporations' incomes, Central bank revenue and Capital receipts in the form of external loans and debts from international financial institutions. As from the figure 3, its very clear that government revenue consist of tax and non tax revenue. The major chunk of Pakistan government revenue is from tax revenue. Tax is of two types: direct and indirect, out of which indirect tax portion in total tax is 60% and 40% is direct tax. Indirect tax includes sales tax, excise duty and custom duty. In 1991-92 the tax revenue %age to government revenue was 13.7% and in 2012 it is just 9.9%. The percentage share reduces by 3.8%. On other hand, in 1991-92 the nontax revenue %age to government revenue was 5.5% and in 2012 it is just 2.5%.

FIG-03: GOVERMENT REVENUE

25.0

20.0

15.0

10.0

5.0

0.0

non-tax

tax

Data based on table-2 in Appendix

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Tax as a budgetary tool for Economic Growth of Pakistan

TAX TO GDP RATIO

Today Pakistans tax-to-GDP ratio stands at just above 9 %. It has been falling gradually from the peak of 11 % attained in 1997-98. As a whole over the 15 year period, 1997-98 to 2011-12, there has decrease of approximately 2% in the tax-to-GDP ratio. The overall tax to GDP ratio has varied between 9.5 to 11 % mainly due to structural deficiencies in the tax and administration system. Pakistan is characterized as having the lowest tax to GDP ratio not only amongst the peer countries but also in the region.
A number of explanations can be put forward in this regard, why the tax to GDP ratio has fallen. The first is the loss of growth momentum of the economy, especially of large-scale manufacturing and imports, which constitute the primary tax bases in the economy. This has implied a low marginal tax-to-GDP ratio, which has resulted over time a fall in the average tax-to-GDP ratio. The second explanation is related to revenue losses resulting from the on-going tax reforms in the country during the decade of the 90's, especially the process of trade liberalization which has involved major reductions in statutory rates of import tariffs. Finally, there is a strong perception that there has been a systemic decline in the quality of tax administration and in the face of growing evasion and corruption; it is argued the incidence of taxes has effectively declined.

FBR was assigned a revenue target of Rs.1952 billion for 2011-12, which was 26 % over the actual collection of Rs.1550 billion of 2010-11. Despite slow growth in the large manufacturing sector and less tax realization from major sectors, FBR managed to collect 96.5 % of the assigned target showing a healthy growth of 21.4 percent over the actual collection of 2010-11. This growth has increased the FBR tax to GDP ratio from 8.6 percent in 2010-11 to 9.1 percent in 2011-12(Fig-4).

FIG-04 : TAX REVENUE %AGE OF GDP

12.0 10.0 8.0 6.0 4.0 2.0 0.0 11.0 10.5 9.1 9.3 9.1 9.4 9.2 9.1 9.4 9.8 9.8 9.1 8.9 8.6 9.1

Data based on table -3 in Appendix

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Tax as a budgetary tool for Economic Growth of Pakistan

Trend

FIGURE-05 gives the tax-to-GDP ratio overall and for individual taxes from 1997-98 to 2011-12. The analysis is restricted to federal taxes, which constitute the bulk (over 90 per cent) of the tax revenues in the country. Therefore, we concentrate on taxes collected by the Central Board of Revenue (CBR). Major changes are observed during the period in the structure of tax revenues. First, the share of direct taxes has increased dramatically from 35 % to almost 40% in 201112(FIG-01). Second, within indirect taxes, there have been significant changes in the importance of different taxes. The contribution of sales tax in indirect tax has risen more than the rise in customs and excise duties. (fig-05)

FIG-05 : INDIRECT TAX

1400.0 1200.0 1000.0

800.0
600.0 400.0 200.0 0.0

Customs

Sales

Excise

Data based on table-04 in Appendix

Looking at the time path of individual taxes, we have that the tax-to-GDP ratio of direct taxes in 1997-98 was 3.9 % and now it is 3.6%. The decline in direct tax to GDP is due corporate profitability has been adversely affected by the on-going recession in the economy. The tax-to-GDP ratio of excise duties in 1997-98 was 2.3% and now its just 0.7%., however, the ratio has fallen significantly. This is partly a reflection of the Stagnation of the larger-scale manufacturing sector in the late 90s and partly the consequence of ongoing tax reforms involving the replacement of excise duty by sales tax in a number of industries and services. The tax-to-GDP ratio of custom duties in 1997-98 was 2.8% and now its just 1%. However, the ratio has fallen significantly. The process of trade liberalization has implied major reforms in the area of taxation of international trade. In the first phase, export duties were eliminated in the early 90s. This was followed in the mid-90s by the abolition

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Tax as a budgetary tool for Economic Growth of Pakistan

of various forms of Para tariffs, primarily import surcharges. The momentum for scaling down import tariffs picked up in the second half of the 90s. Simultaneously, there have also been changes in the exemptions and concessions policy. The tax-to-GDP ratio of sales tax in 1997-98 was 2.0% and now its just 4.1%. During 1998 to 2000, the tax-to-GDP ratio of the sales tax increased significantly from 2.5 to 3.1 %. This is partly a reflection of the stagnation of the larger-scale manufacturing sector in the late 90s and partly the consequence of on-going tax reforms involving the replacement of excise duty by sales tax in a number of industries and services. The highest tax-to-GDP ratio of sales tax was 4.2 % in 2002-03. Now the largest source of revenue is sales tax (44% of total tax revenue is composed of sales tax).The jump is due to major broad-basing of the tax to cover sectors like cement; petroleum, oil and lubricants; electricity and other services. In most cases it has substituted for other sources of revenue like excise duty and petroleum development surcharge. .

FIG-06: TAX TO GDP RATIO

12.0

10.0

8.0

6.0

4.0

2.0

0.0

Direct tax

Custom

federal excise

sale tax

Data based on table -3 in Appendix

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Tax as a budgetary tool for Economic Growth of Pakistan

ECONOMIC GROWTH
An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms or in real terms. For comparing one country's economic growth to another, GDP or GNP per capita should be used. The flexibility of the economy of Pakistan has been tested several times by one crisis after another. The sharp rise in international oil and food prices, the internal security hazards and the repeated natural disasters (floods) have troubled the macroeconomic strategy with shock after shock. Domestically, two floods, the difficult security situation and the energy crisis have combined to drastically impact economic growth. Figure-07 presents an overview of GDP growth over the previous years.

FIG-07 : GDP GROWTH %

9 9 8 7 6 5 4 3 2 1 0 7.5 5.8 4.7 3.1 3.7 1.7 3.1 3 3.7 6.8

Pakistan Economic Survey 2011-12

In 2001-02 the GDP GROWTH was 3.1% and after that GDP growth is increasing and its goes to 9% in 2004-05, which is the highest growth of GDP ,and after that in 2005-06,it drop to 5.8% ,it is due to 2005 Kashmir earthquake disaster ( moment magnitude of 7.6).and after that it again increase and reach at 6.8% in 2006-07,which shows that Pakistan has the ability to recover the losses caused by the earth quake .but afterward till now it is declining. Due to the high inflation, the Pakistani rupees depreciation versus the U.S. dollar, and higher international commodity prices, security issues, high subsidy on fuel. In 2010-11, the GDP growth was just 3.0 %, it is due to the floods and heavy rains of 2010 and 2011, skyrocketing oil prices and global contraction. Gross Domestic Product (GDP) growth has been stuck at a level, which is half of the level of Pakistans long-term trend potential of about 6.5 percent per annum and is lower than what would be required for sustained increases in employment and income and a reduction in poverty

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Tax as a budgetary tool for Economic Growth of Pakistan

There have been some successes. Pakistan has been able to withstand the pressures and improve its performance in some key areas such as the check on inflation, the increase in exports and revenue generation and maintenance of comfortable foreign exchange reserve levels. The focus on reforms and austerity through the control of public expenditures despite the difficulties has continued. The economy is now showing signs of modest recovery. The commodity producing sectors and especially the agriculture sector are doing better. Some improvement is also witnessed in the Large Scale Manufacturing sector. The Service sector also gained from healthy trade activities and the improvements in the commodity producing sectors. The smooth functioning of the supply chains is playing a key role in improving the economic situation and ensuring the availability of essential items. Pakistan has the potential to grow at 6 to 7 percent in the next couple of years. Contribution to GDP

Pakistan Economic Survey 2011-12

Above figure presents the structural shift in the economy. During the last 10 years the sectoral share of the agriculture sector has decreased from 24.1 % to 21.1 %. The sectoral share of the manufacturing sector has increased from 18 % 18.6 % .The share of the services sector has increased from 50.9 percent to 53.5 percent in the same period.

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Tax as a budgetary tool for Economic Growth of Pakistan

CONCLUSION
Tax is a very important factor in maintaining the economy no body can disagree with this statement. Tax gives the money which government collects, and uses it in to carry out different operations. The major portion of tax revenue is come from sale tax, which is one of indirect tax, and the second major portion of tax revenue come from income tax, which is direct tax. Other taxes contribution to tax revenue is very low s compare to sales tax and income tax. Pakistan is a developing country, approximately 49% of its population lives under the poverty line and it sales tax rate is 16% ,which is quite high as compare to India. Sales tax increases the price of the commodities, and due to high prices a person cannot purchase the commodity. So the sales tax rate should be reducing to 14% in order to provide low price commodities. In Pakistan ,there is a proper system of tax collection, a person get the NTN number from Income tax authority and become a pert of tax payer list, but the procedure to get the NTN is very difficult and as well as the procedure to file the tax return is not easy ,only 30% peoples are literate. So the income tax authority makes the procedure to get the NTN number and file the tax return easier, in order to get increase the number of tax payer and tax collection. There is a need of change in the tax slab rate for salaried and non salaried individual, now the maximum tax charge rate for salaried person is 20%, it should be increase up to 23%.and for non salaried tax rate should be increase up to 28%, because when a person (salaried & non salaried) get approx Rs 200,000 per month, it is justifiable to increase their tax rate. When a taxable amount of a person (salaried & non salaried) exceeds Rs 400,000(or Rs 33,000 per month income), 5% tax rate is applied, It should be reduce to 4 or 3 %. It reduces the burden the burden of tax on middle income persons. In order to reduce the poverty in Pakistan, tax rebate limit on donation must be increased up to 35% of the taxable is allowed. In order to promote the use of plastic money, income tax authority must increase the tax deducted by bank on cash withdrawal to 0.4%. In order to increase the tax revenue the government put 1% tax on the rent from agriculture property (on above 10,000 per month), mostly the persons who gets the rent from agriculture property are illiterate, so by simply removing two zeros they know that how much of amount they pay as tax. In order to promote industrialization in Pakistan we must reduce the tax rate charge on the income of companies, now the tax rate is 35%, it should be reduced to 32 or 30%, by reducing the tax rate corporation are encouraged to start their new business in Pakistan which reduce our unemployment. Agriculture contribution in the GDP is 21%, but its

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Tax as a budgetary tool for Economic Growth of Pakistan

contribution in tax revenue is zero because agriculture income comes under the head of exemption income. This is also the reason of low tax to GDP ratio, because on side GDP increases but on other tax revenue is not increases as much. In order to increase our tax to GDP ratio, we must impose minimum tax of 1% on agriculture income above Rs 400,000 per annum. Advance tax system is very good to collect the tax amount in advance but the penalty %age charge is very low, it should be increase up to 8% on 1st default. In advance tax, turnover of quarter is calculated by using 2 month 15 days and then makes it average for 3 months, so the last 15 days are not included in calculation, so people put less turn over in first 15 days of the last month of quarter, which in result low amount of tax is too be paid. For this, it is necessary to allow 15 days time after completion of quarter to file the advance return in order to improve tax collections. In order to decrease our import, it is necessary to change the withholding final tax charge to adjustable tax charge. Decrease in imports helps us to improve our balance of payments, By only increase or decrease the tax rate cannot help us to improve our tax collection. Another problem in Pakistan is corruption; to tackle with this problem we must make clear and fair system in Pakistan. Peoples are fully disclosed out there income. Organizations show high expenses, which in result reduce there income, which reduce the tax amount to paid. Mostly rich people didnt pay tax because they have political power. In Pakistan small business are not paying tax because they are not registered, they are earning but give nothing to government in return. A system should be made by which small business get registered easily and in starting 1% tax rate is imposed on it, instead of 25%,and by the passage of time tax rate increase each year.

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Tax as a budgetary tool for Economic Growth of Pakistan

APPENDIX

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Tax as a budgetary tool for Economic Growth of Pakistan

TABLE-1
Pakistan Economic Survey 2008 & 2011-12 structure of federal tax revenue (Rs in billion)
YEAR
1990-91 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12B

total FBR
111 282.2 293.7 308.5 346.6 392.3 404.1 460.6 520.9 590.4 713.5 847.2 1008.1 1161.1 1327.4 1558.2 19520

TAX REV as % of GDP

11 12 11 10 9.1 9.4 9.2 9.6 9.2 8.9 9.4 9.7 9.8 9.1 9 8.6 9.5

direct tax
20 [18.0] 85 [30.1] 103.3 [35] 110.4 [35.8] 112.6 [32.5] 124.6 [31.8] 142.5 [35.3] 151.9 [33.0] 165.1 [31.7] 183.4 [30.1] 225 [31.5] 333.7 [39.4] 387.9 [38.5] 443.5 [38.2] 526 [39.6] 602.5 [38.7} 745 [38.2]

indirect tax
91 [82] 197 [69.9] 190.4 [65] 198.1 [64.2] 234 [67.5] 267.7 [68.2] 261.6 [64.7] 308.7 [67.0] 355.8 [68.3] 407 [68.9] 488.5 [68.5] 513.5 [60.6] 620.2 [61.5] 717.6 [61.8] 801.4 [60.4] 955.7 [61.3] 1207 [61.8]

Note: [ ] shows as percentage of total tax revenue

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TABLE-2
Fiscal Policy Statement 2012-13

Fiscal Indicators (as percent of GDP)

Real GDP growth 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 7.6 2.1 4.4 5.1 6.6 1.7 3.5 4.2 3.9 2.0 3.1 4.7 7.5 9.0 5.8 6.8 3.7 1.7 3.1 3.0 3.7 Overall Fiscal deficit 7.5 8.1 5.9 5.6 6.5 6.4 7.7 6.1 5.4 4.3 5.5 3.6 2.3 3.3 4.3 4.4 7.6 5.3 6.3 6 6.6 expenditure Current 19.1 20.5 18.8 18.5 20.0 18.8 19.8 18.6 16.4 15.3 16.2 16.0 13.8 14.5 14.7 15.9 18.1 16.0 16.1 16.1 15.1 Development 7.6 5.7 4.6 4.4 4.4 3.5 3.9 3.3 2.5 2.1 3.4 2.4 2.6 2.7 3.7 3.5 4.1 3.8 4.2 3.0 3.9 Total 26.7 26.2 23.4 22.9 24.4 22.3 23.7 21.9 18.9 17.4 19.6 18.4 16.4 17.2 18.4 19.3 22.2 19.9 20.3 19.1 19.1 Tax 13.7 13.4 13.4 13.8 14.4 13.4 13.2 13.3 10.6 10.5 10.7 11.4 10.8 10.1 9.9 10.3 10.3 9.5 9.9 9.4 9.9 Revenue Non-Tax 5.5 4.7 4.1 3.5 3.5 2.4 2.8 2.7 2.8 2.6 3.5 3.4 3.2 3.7 4.2 4.7 4.4 5.1. 4.1 3.1 2.5 Total 19.2 18.1 17.5 17.3 17.9 15.8 16.0 16.0 13.4 13.1 14.2 14.8 14.1 13.8 14.1 15.0 14.6 14.5 14.0 12.5 12.4

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Tax as a budgetary tool for Economic Growth of Pakistan

TABLE-3
Central board of revenue of Pakistan

TAX TO GDP RATIO

year 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Direct tax 3.9 3.8 3.0 3.0 3.2 3.1 2.9 2.8 3.0 3.8 3.8 3.5 3.5 3.3 3.6 Custom federal excise 2.8 2.2 1.6 1.5 1.1 1.4 1.6 1.8 1.8 1.5 1.5 1.2 1.1 1.2 1.1 2.3 2.1 1.5 1.2 1.1 0.9 0.8 0.8 0.7 0.8 0.9 0.9 0.8 0.9 0.6 sale tax 2.0 2.5 3.1 3.6 3.7 4.0 3.9 3.7 3.9 3.6 3.7 3.6 3.5 4.3 3.9 Total Indirect Tax 7.1 6.7 6.1 6.4 5.9 6.3 6.3 6.3 6.4 5.9 6.1 5.6 5.4 5.3 5.5 total tax 11.0 10.5 9.1 9.3 9.1 9.4 9.2 9.1 9.4 9.8 9.8 9.1 8.9 8.6 9.1

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TABLE-4
Pakistan Economic Survey 2008 & 2011-12
YEAR customs 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12B 74.5 65.0 61.6 65.0 47.8 59.0 89.9 117 138 132.3 150.7 148.4 160.3 184.9 215

INDIRECT TAX
Sales 53.9 72.0 116.7 153.6 166.6 205.7 219.1 235.5 294.6 309.4 377.4 451.7 516.3 633.4 852 Excise 62.0 60.8 55.6 49.1 47.2 47.5 44.6 58.7 55.0 71.8 92.1 117.5 124.8 137.4 140.0 total 190.4 198.1 234 267.7 261.6 308.7 355.8 407 488.5 513.5 620.2 717.6 801.4 955.7 1207

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