The Federal Board of Revenue (FBR) has revealed that Pakistan’s tax expenditure accounted for 2.8 percent of its gross domestic product (GDP), while India’s expenditure stood at 0.4 percent of its GDP.
According to the FBR’s tax expenditure report-23, many small and emerging economies offer tax concessions and exemptions as part of their tax policies.
Comparatively, Brazil and South Africa had tax expenditures exceeding 4 percent of their GDP, and Colombia’s expenditure was close to 7 percent.
Pakistan and India fall on the lower end of this spectrum:
The report highlights that across the world, most countries provide various forms of tax relief, concessions, and exemptions for specific products and segments of society.
There is significant variation in tax expenditures among different countries.
Advanced countries tend to report higher estimates of revenue forgone. For example, the Russian Federation grants substantial tax exemptions amounting to 14.8 percent of its GDP.
In the United States, income tax expenditure constitutes 6.6 percent of GDP, and Australia experiences a reduction in government tax revenue of approximately 8 percent of GDP.
Similarly, Canada, Japan, and the UK allow tax expenditures of up to 6.6 percent, 7.5 percent, and 8.1 percent of their respective GDPs.
In European countries, tax expenditures generally align with the world average of around 4 percent of GDP. However, Finland and the Netherlands deviate from this trend, with tax expenditures accounting for 12 percent and 12.8 percent of their GDPs, respectively, as highlighted in the tax expenditure report-23.