Team Details:
| ZEHRA FAROOQ PhD Candidate Tulane University, US (PI) |
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| MUZAMMAL RASHEED CEO/Senior Partner Enfoque Consulting, Islamabad (Co PI) |
Theme/Relevant Ministry:
TAXATION/ FISCAL MANAGEMENT:
Federal Board of Revenue of Pakistan
Project Brief:
Policy makers in Pakistan are focusing on broadening of the tax base (BTB) and the purpose is twofold: to decrease informality within the economy and raise tax revenue. In this study we aim to evaluate the revenue efficiency of vertical broadening of the tax base. Specifically, for every new taxpayer added to the current tax base, we will analyze per-taxpayer revenue benefit as well as the per-taxpayer administrative cost (including cost of tax collection). This study will provide first-ever evidence of the yield of BTB activities in Pakistan and their potential to tap untaxed revenue. Furthermore, given that the increased costs of tax administration are also met through increased tax levies or diversion of funds from other public resources, our analysis will provide policymakers a lens through which to view BTB activities and revamp them to suit the precise needs of the current economic climate in Pakistan.
Public Policy Relevance:
The insights from the study will shed light on what aspects of BTB activities are efficient and what parts need to be reformed to ensure efficient ways to increase tax revenue whilst also ensuring equity. Analysis will shed light on how much “new income” is brought into the tax net and resultantly, what revenue is generated through these new registrations. By looking at the public expenditure side of these policies, our analysis will also provide critical insights on the costs of administration. Given that increased costs of tax administration also take away resources from other public expenditure heads, our study will argue the revenue efficiency of these measures and help policymakers determine whether these BTB drives can be a sustainable source of untapped tax revenue in the future. Finally, our results will provide a solid foundation, for not just policy makers but also tax administrators, to determine structural shifts in focus required to develop future tax policies for increasing tax revenue, especially to ensure economic stability of the country.