One of the key demands of the IMF is to increase the tax-to-GDP ratio to 13-14 percent by the end of the upcoming programme and to boost FBR tax revenues by over 30 percent in the next fiscal year. Generating more revenue to lower the fiscal deficit is essential. However, both the IMF and Pakistani authorities are not emphasizing enough the need for provinces and cities to contribute their fair share of revenue.

Pakistan’s total fiscal revenues, including those from both provincial and federal levels, averaged 12 percent of GDP over the last five years. Within this, the federal share is 10.6 percent of GDP, while the provincial contribution is a mere 1 percent of GDP. This excessive reliance on federal revenue needs to be reconsidered.

In India, the overall tax-to-GDP ratio is around 18 percent, with about one-third (6 percent of GDP) contributed by states and cities. The federal tax collection in India is not significantly higher........

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