LAHORE: Provinces in Pakistan have limited incentive to boost collection of key taxes as they continue receiving substantial federal transfers under the National Finance Commission (NFC) award, according to economic experts and senior officials.
FBR Chairman Rashid Mahmood Langrial highlighted that provinces underperform in collecting sales tax on services, agriculture income tax, and property tax. He noted that of a total agriculture tax base of Rs 3.7 trillion, provinces collected only Rs 8.4 billion, while property tax collection stood at just 0.08% of GDP, far below regional peers like Malaysia (5%), Indonesia (3%), and India (2%). Per capita property tax in Karachi is just Rs 111, compared to Rs 11,233 in Bangalore.
Experts emphasized that improving provincial tax collection is critical to addressing Pakistan’s public finance crisis. Economist Savail Hussain suggested that NFC transfers should be made performance-based to encourage accountability.
In a related discussion at ThinkFest, stakeholders stressed the need for both federal and provincial governments to collaborate on raising the tax-to-GDP ratio, which remains below targeted levels.
