Mohsin Siddiqui (Chief Reporter)
The Federal Board of Revenue (FBR) has reported that the tax-to-GDP ratio for the fiscal year 2023-24 stood at 9%. This information comes from the FBR’s latest revenue forecasting report for 2024-25. The report highlights that the tax-GDP ratio fluctuated between 8.7% and 9.2% during the year, marking a notable improvement from the previous year’s ratio of 8.5%. This upward trend in the tax-GDP ratio signifies a positive shift in revenue collection efforts.
The FBR’s revenue forecasting report for FY2024-25 employs traditional methodologies to predict future revenue. The base year of FY2023-24 serves as a foundation, with an expected autonomous growth rate applied. The FBR forecasts an increase of Rs. 1,922 billion for FY2024-25, bringing the anticipated revenue collection to Rs. 11,174 billion.
According to the report, the revenue forecast for 2024-2025 stands at Rs. 11.17 trillion, assuming no new budgetary measures are introduced. The FBR asserts that most of its taxes are buoyant, indicating a strong positive correlation with variations in macroeconomic indicators used in their forecasting model. Therefore, if macroeconomic indicators perform well, there is significant potential for achieving growth in tax revenues.
The report emphasizes that with the improvement of both local and global economic conditions, tax revenues are expected to increase accordingly. Additionally, the removal of import restrictions is anticipated to enhance tax collection at the import stage, contributing further to revenue growth.
For FY2024-25, the FBR has set a revenue target of Rs. 11,174 billion, which is 20.8% higher than the revenue collection figure of Rs. 9,252 billion recorded in 2023-24. This ambitious target reflects the FBR’s confidence in achieving higher revenue through improved economic conditions and enhanced tax collection mechanisms.
The FBR’s projection underscores the potential for significant revenue growth, driven by both domestic economic improvements and favorable international economic trends. If the macroeconomic environment remains positive, the FBR expects to meet or even exceed its revenue targets.
The FBR’s latest report offers several key insights into Pakistan’s revenue collection landscape. The improvement in the tax-to-GDP ratio from 8.5% to 9% indicates that the government’s efforts to enhance tax compliance and broaden the tax base are yielding results. This trend is crucial for improving the fiscal health of the country and reducing the fiscal deficit.
The projected revenue increase for FY2024-25, amounting to Rs. 1,922 billion, highlights the potential for substantial growth in tax collection. However, this projection is contingent upon the performance of macroeconomic indicators. Factors such as GDP growth, inflation, and exchange rates will play a critical role in determining whether these revenue targets are met.
The emphasis on the removal of import restrictions as a means to boost tax collection at the import stage is particularly noteworthy. This approach suggests a strategy to leverage international trade as a significant revenue stream. As global economic conditions improve, increased imports could translate into higher tax revenues, provided that efficient tax collection mechanisms are in place.
