ByKarachi, Pakistan: The State Bank of Pakistan (SBP) has released a report highlighting the alarming state of Pakistan’s tax efficiency, particularly in terms of the C-Efficiency Ratio (CER) and the effective General Sales Tax (GST) rate.
The report revealed that Pakistan’s CER, a measure of tax efficiency, declined from 22.6% in FY23 to 20.7% in FY24. This indicates a significant erosion of the GST revenue base due to compliance issues and exemptions. PK Revenue
The SBP noted that Pakistan’s effective GST rate is only one-fifth of its actual weighted GST rate, suggesting that the tax is not being applied to a broad enough base. The report emphasized the need to broaden the tax base and improve enforcement to increase revenue collection.
The SBP also highlighted the challenges posed by high GST rates, which can exacerbate compliance issues and lead to tax evasion. The report suggested that a lower GST rate combined with better enforcement could lead to higher revenue yields.
The report’s findings underscore the importance of tax reform in Pakistan to improve tax efficiency and increase revenue collection. The government will need to take steps to broaden the tax base, enhance enforcement, and consider reducing the GST rate to achieve these goals.
