Re: National Health Insurance Scheme to cover 100 million Pakistanis
There are 2 ways to increase the revenue collection. Both are important in Pakistan's scenario:
1) Improve the tax to GDP ratio which currently stands at 10% of GDP. There are 2-3 major hindrances in this regard. One is the agriculture sector. After 18th amendment the right to impose tax on agriculture has been given to provinces. This means the federal government can not collect tax from a sector of the economy which constitute about 22% of the GDP. Secondly the foreign remittances from Overseas Pakistanis ($15 billion remitted through official banking channels, $7-8 billion is brought by Pakistanis as cash according to SBP estimates, and $7-8 billion which comes through hundi according to SBP estimates… Total around $ 30 billion.) constitutes around 12% of the GDP. So when you take out this 34% of the GDP which can not be taxed by federal government.. the burden of improvement comes to the balance 66% of GDP.. means already taxing the taxed sectors.
This is not as simple as people chanting slogans in jalsaa.. If you take the actual tax to GDP ratio on balance 66%, it comes to 15%. Realistically speaking if we are able to achieve the 17% like India.. the total tax to GDP ratio will increase to about 13%. I doubt we can achieve that because we do not have the same size of corporate sector in Pakistan.
2) The more realistic way of increasing the revenues in Pakistan is to increase the size of domestic economy. Our revenue collection increased 17% in last fiscal year. Next year the revenue target is about 22% higher than ongoing year. FBR expects to collect around 2800 billion rupees in taxes compared to 2300 this year. This will not increase significantly the tax to GDP ratio.. but if the GDP growth target of 5% is achieved.. this revenue target will be easily achieved.
My friend,
One way is to criticize just for the sake of criticism. The other way is to look at things in an objective way. Our economy has been stagnate for past many years now. We need growth stimulus, infra structure spending, investment climate through better security situation, stability, predictability. We can add 2% to GDP growth by tackling our power crisis only.
At 67.5% public debt to GDP ratio.. we are not in big trouble. India, Germany, Japan, US.. all have much worse ratios. This debt is not going to go down.. but the ratio can improve if the GDP growth improves… subsequently increasing the size of the cake. Spending can go down significantly if the interest rates go down. Our biggest spending head is interest payment which is not due to a huge debt but it's purely because of high interest rates. Japan pays only 0.5% interest on 100% public debt to GDP ratio.. we pay 15%. Interest rates which will come down if exchange regime is stabilized and growth target are met. It will come down when fiscal deficits come down. In short it will come down when we come out of this gloomy viscous cycle in which we are trapped for past several years.
Sorry to bore you with this dry reply which I am sure the forum readers don't want to read.. We are all here for some juicy stuff. Let's go back to Altaf thread for some humorous comments.
So it is unrealistic to tax feudals but possible to increase the size of domestic economy, so that the same class of people who have been giving taxes, could be taxed further?!