ISLAMABAD: Pakistan’s policymakers are in an unenviable position while formulating the upcoming fiscal year’s budget.
Everyone from small and medium enterprises to large-scale manufacturing industries is looking for relief measures to cope with the Covid-19 crisis. Even without the pandemic, many would expect some relief in the existing taxation regime as the government is reaching the halfway point of its tenure.
Unfortunately, there may not be much room for any major tax reductions. Already this year, the country would be fortunate even to achieve 70% of the original tax collection target of Rs5.5 trillion (which has been revised downwards several times).
While some blame lies with Covid-19, it was apparent from the beginning that the original target was almost impossible. One key lesson is that there should be some realism in setting the revenue target as that is the foundation of the whole budgetary exercise.
It should not be too difficult to estimate a ballpark revenue figure as the size of gross domestic product (GDP) and the growth rate are relatively better estimated, and the tax-to-GDP ratio does not change much.
