Federal Board of Revenue Chairman Rashid Langrial has said that provinces will have to make greater efforts than the federation in tax collection because their revenue gap is larger, while the federal government must also reduce its expenditures.
According to sources, he expressed these views while speaking at a panel discussion held at the Alhamra Arts Center under the Aafkaar-e-Taza Think Fest. He emphasized that economic growth is essential for improving tax collection. He said that under the 2009 NFC Award, the federation and provinces had agreed to raise the tax-to-GDP ratio to 15 percent.
Rashid Langrial stated that provinces have three major tax sources: services tax, agricultural income tax, and property tax. He explained that to achieve a 15 percent tax-to-GDP ratio, provinces would need to contribute at least 2.5 percent, while the remaining 12.5 percent would be collected by the federation. If the ratio is increased to 18 percent, the provincial share would rise to 3 percent.
Stressing the need for serious discussion on structural issues, he said that matters related to the NFC would also be discussed. He questioned whether the federation should continue spending on small-scale projects in the provinces, adding that such issues can be resolved through mutual understanding.
He pointed out that property tax accounts for 5 percent of GDP in Malaysia, 3 percent in Indonesia, and 2 percent in India, while in Pakistan it stands at only 0.8 percent. He said one reason for low tax collection in the provinces is the lack of sufficient pressure from the federation.
According to him, per capita property tax collection last year was Rs 111 in Karachi, compared to Rs 11,233 in India’s Bengaluru, almost 100 times higher. In Lahore, per capita collection was Rs 623, while in Chandigarh it was Rs 1,276 per person. He reiterated that due to the large revenue gap, provinces must make greater efforts than the federation, and emphasized again that economic growth is fundamental to increasing tax revenues.
The FBR chairman also said that installing cameras in sugar mills resulted in an additional Rs 60 billion in tax collection. He rejected the perception that the funds were wasted, stating that the amount was transferred to the provinces, where significant development projects are underway.
