Pakistan and India Rank Poorly on Global Tax Concessions List Topped by Russia: Report

Russia tops the world in granting tax exemptions to its citizens, which is essentially an estimated 14.8 percent of its Gross Domestic Product (GDP), while Pakistan comes at the tail-end of this distribution, according to a report on tax exemptions by the Federal Board of Revenue (FBR). The FBR’s report on tax expenditure-2022 revealed that the global comparison of 21 countries’ tax expenditure during 2019 and 2020 shows that most advanced countries have higher estimates of forgone tax revenues. Within the sample set of countries, the Russian Federation tops the list with an estimated 14.8 percent of its GDP as tax expenditure, while India is at the other extreme with only 0.4 percent of GDP as a tax expenditure. Pakistan ranked 19th on the list, with an estimated 2.8 percent of its GDP in terms of tax expenditure. A large number of countries provide concessions, exemptions, and tax relief on certain products and segments of society. There is a huge variation across countries, and advanced countries mostly report significantly higher estimates of revenue foregone. The FBR stated that the Russian Federation is one of the largest economies that also simultaneously provides a huge size of tax exemptions. Income tax expense in the US constitutes 6.6 percent of the GDP, which is more than $1.4 trillion a year. This amount is four times higher than Pakistan’s total GDP. Similarly, the government tax revenue gets reduced by more than eight percent of the GDP in Australia. Canada, Japan, and the UK are also creating tax expenditures that are more than seven percent of their GDP. Tax expenditure in European countries is relatively close to the world average tax expenditure (around four percent of the GDP). However, Finland and Netherlands are exceptions as their tax expenditures exceed 12 percent of their GDP. A large number of small and emerging economies also give tax concessions and exemptions for local supplies and imported goods. For instance, tax concessions and exemptions amount to more than four percent of the GDP in Brazil and South Africa, come close to eight percent in Colombia and Mauritania, and exceed 10 percent in Jordan. Pakistan and India appear at the tail-end of this distribution. Pakistan has a tax expenditure equal to 2.8 percent of GDP and India has an expenditure of 0.4 percent of their GDP, the FBR added.