ISLAMABAD: As part of the nation’s overall tax strategy, the government has pledged to the Asian Development Bank (ADB) to adopt and begin implementing the National Carbon Pricing Strategy with effect from January 1, 2022, up from the current tax-to-GDP ratio of 8.5 percent.
This is a portion of a $200 million loan from the ADB for the Resource Mobilization Reforms Programme, which is largely being handled by the Federal Board of Revenue and is due to start on January 1, 2023, and terminate by the end of March 2024. The government will also broaden the track and trace system (TTS) for better tax recovery to a variety of industries, including the petroleum, pharmaceutical, and beverage industries.
Over the past 10 to 15 years, the FBR has accessed a number of financing programmes, including from the World Bank, to raise the tax-to-GDP ratio to 10%, but despite making some initial gains, these tax ratios have not been sustained. Over this time, the tax-to-GDP ratio has varied between 8% and 10%.
The government will establish a new tax policy wing (TPW) in the Ministry of Finance to “lead comprehensive tax policy creation and accompanying public engagement” as part of the ADB initiative to support an inclusive and evidence-based institutional framework for tax policy and administration.