Islamabad: Pakistan’s estimate of tax evasion (revenue gap) for the fiscal year 2022-2023 was approximately 5.8 trillion rupees, constituting 6.9% of GDP.
This revelation was made during a presentation to Prime Minister Shehbaz Sharif and the Special Investment Facilitation Council (SIFC), according to which the estimated theft of petroleum products through smuggling and other means amounted to 996 billion rupees.
Furthermore, theft on an annual basis was observed in the retail sector amounting to 888 billion rupees, the transport sector with 562 billion rupees, Independent Power Producers (IPPs) with 498 billion rupees, smuggled goods worth 355 billion rupees, revenues of 342 billion rupees, and real estate with 148 billion rupees.
In the “Other” category, tax evasion was estimated at 1.607 trillion rupees annually.
The presentation revealed that the highest tax evasion occurred in sales tax, which could amount to up to 2.9 trillion rupees annually. Additionally, there was approximately a 0.6 trillion rupees (600 billion rupees) difference in customs annually, which includes under-invoicing and smuggling.
The International Monetary Fund (IMF) has analyzed in its diagnostic report that the difference in tax at the policy level was not significant and could range up to 12.9% of GDP.
There was also a difference in implementation between total revenues and expenditures, with federal tax revenues constituting 9.1% of GDP while federal non-tax revenues were at 1.2% of GDP.
Moreover, provincial taxes contributed approximately 1% to GDP while total revenues accounted for 11.4% of GDP.
In conclusion, federal expenditures were about 12.9% and provincial expenditures were around 6.1% of GDP, bringing total expenditures to 19% of GDP. There is a 7.6% difference between the country’s total revenue and expenditures in terms of GDP.
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