The Federal Board of Revenue (FBR) has released recently the Revenue Division Year Book for 2022-23. This is a very useful publication and highlights the trends in the level and the composition of revenues from different federal taxes.

The performance of revenues collected by the FBR can be seen as positive in 2022-23 in view of a shortfall of only 0.5% in the attainment of the annual target. The target was Rs 7,200 billion and the actual revenue was Rs 7,164 billion.

However, the growth rate achieved in relation to 2021-22 was 16.5%. This is significantly lower than the nominal GDP growth rate of 26% in GDP.

One of the main reasons for the lower growth rate in FBR revenues is the substitution of some of these revenues, by reduction in tax rates, with the imposition of the petroleum levy.

The Ministry of Finance treats the petroleum levy as a source of non-tax revenue, while IMF considers it as a part of federal tax revenues.

Based on the IMF classification, petroleum levy revenues are merged with FBR revenues. This raises the total federal tax revenues in 2022-23 to Rs 7,744 billion. The corresponding revenues in 2021-22 were Rs 6,276 billion.

The growth rate of tax revenues is higher at 23.4%. However, this is still below the GDP growth rate.

As such, the federal tax-to-GDP ratio has fallen from 9.4% to 9.1% of the GDP. This is even more disappointing when this implies a drop of 1% of the GDP from the level attained in 2017-18.

There is also a wide divergence in the growth rates of........

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