Taxation

A Forecasting Model of Punjab Revenue and Spending

Anjum Nasim

In June, Punjab's new budget will be presented before the national and provincial assemblies to be finalized by July 1st. According to a new projection of Punjab's revenue and spending by Anjum Nasim, Senior Research Fellow at the Institute of Development and Economic Alternatives (IDEAS), the Punjab government will incur fiscal surpluses of Rs.90 billion in fiscal year 2015/2016 and over Rs.370 billion by 2019/2020. The report provides detailed information on how Punjab's budget is structured, and serves as a manual for an upcoming app developed by IDEAS to simulate different budget scenarios.

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Taxing to Develop: When 'third best' is best

Henrik Kleven, Upaasna Kaul and Adnan Khan

This Policy Brief suggests that the barriers to information and enforcement that plague developing countries require experimentation and policy innovation. Therefore, a 'third best' approach is required in which policies must address enforcement gaps and strengthen information trails. For that purpose, policy design needs to incorporate taxing revenue instead of profits since information on revenue is more readily available. It should also leverage incentives and social pressures to improve tax compliance. Measures to improve incentives for tax collectors could further aid in tax enforcement.

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Khyber Pakhtunkhwa Revenue Mobilization

Anjum Nasim

This policy brief is based on the section written by Anjum Nasim, Institute of Development and Economic Alternatives (IDEAS), in “Reclaiming Prosperity in Khyber Pakhtunkhwa” on fiscal space. Over the last two years, Khyber Pakhtunkhwa’s (KP) provincial finances have improved markedly, mainly due to increased transfers from the federal government. However, large pay and pension raises in the last two fiscal years have consumed significant resources. These expenditures have led to inadequate spending on operations and maintenance, with adverse consequences for asset maintenance. Additional fiscal space is now required to meet the development needs of the province.

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Reforming Urban Property Tax in Punjab

Ijaz Nabi and Hina Shaikh

The brief highlights that the property tax collected by Punjab is roughly one fifth of the collection by provinces in other comparable countries suggesting that collection can be increased to 25 billion after reforms. UIPT is only one tenth of one percent of the GDP. Various reasons identified for this in the policy paper include; the lack of growth of the property tax base and undervaluation of property base by 45% to avoid being fairly taxed, tax administration needs to be strengthened and new rating areas to be notified. The current tax rate on property, twenty five percent, is considered too high creating incentive for evasion and the differential in tax rate between owner- occupied and rented out properties in Punjab (1:10) is argued to be the most important source of corruption.

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General Sales Tax: sailing ahead but…

International Growth Centre

The brief sheds light on the fastest growing stream of tax revenue in Pakistan. The need for globalization and accompanying trade liberalization policies has resulted in a stop in custom duties. Thus, the government will have to straighten out the sales tax regime to plug the growing federal collection gap. Sales tax is the single most important source of government revenue and deserves more attention from the senior management of the FBR. The brief highlights that while some companies are taxed negatively the others are taxed highly. Only the top 1000 companies pay 97.4% of all sales tax and federal duty. The brief proposes policy solutions in this regard.

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Personal and Corporate Income Tax in Pakistan

Ijaz Nabi and Naved Hamid

Garment manufacturing, the least energy and capital-intensive kind of industrial activity, is not realising its potential in Pakistan to grow the economy and create employment. To unlock the benefits of garments manufacturing on Pakistan's economy, it must move up the value chain and compete in global export markets.

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Taxation Crisis in Pakistan

International Growth Centre

The brief highlights the need for indirect taxation due to the shortage in income tax payers in the country. This is less than 1 percent of the population of 180 million. The individual income tax from salaried workforce accounts for only 3 percent of all taxes collected by the government. Indirect taxation is considered regressive. Twenty-five percent of all taxes in Pakistan come from just one sector – the energy sector. The problem thus does not lie in high tax burden on those who pay taxes but in the lack of fairness in the sense that too few people pay most of the tax. This happens when rules and regulations allow many people to escape the tax net legally and also illegally through poor enforcement. The brief suggests that it is not the “burdened middle class” but in fact the corporate sector of Pakistan that pays over 62.4 percent of all income tax in Pakistan.

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Public Expenditure in Pakistan

Hanid Mukhtar

This study examines the pattern of public expenditure in Pakistan — including public debt and its management, the morass of subsidies and grants, fiduciary oversight and sectoral priorities — and argues for efficient utilization of public money. Dr. Mukhtar makes the case for significant increase in revenue collection in the context of improved expenditure management and the need to sharply increase public expenditure for meeting development objectives.

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Fiscal Space for Social Protection in Pakistan

Anjum Nasim

The working paper looks at the expenditure on social protection programs and compares it with the subsidies provided to the non-poor. It argues that fiscal space for social protection can be created by reducing the implicit and explicit subsidies provided to the non-poor, reducing losses of public sector enterprises, improving economic growth and raising tax-to-GDP ratio which is one of the lowest in the world.

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Interprovincial Differences in Power Sector Subsidies and Implications for the NFC Award

Umbreen Fatima and Anjum Nasim

This paper outlines the electricity tariff determination process; reports on the TDS by consumer group, DISCO and province; and considers the likely changes in the federal/provincial shares of the divisible pool of tax revenue if TDS were given to the provinces in the form of a revenue share from the divisible pool.

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