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International Development CommitteeWritten evidence submitted by David Steven, Senior Fellow, Centre on International Cooperation, NYU and Brookings Institution

As you know, I am not an expert on taxation, although I feel on safe ground when saying that Pakistan’s problems collecting revenue are unsurprising for a country with weak institutions and a fragile political settlement.

The data I referred to were drawn from the World Bank (http://databank.worldbank.org) and are for compulsory transfers to the central government for public purposes. The Bank’s data are compiled from the IMF and national governments. Tax revenue for Pakistan is shown as 9.31% of GDP in 2011, compared to India at 9.73% of GDP in 2010 (see tables overleaf).

I have compared these data to figures provided by the IMF in its World Economic Outlook for central government revenue (defined as taxes, social contributions, grants receivable, and other revenue). The IMF provides a considerably higher figure than the World Bank for India in 2012 (18.79%), but its figure for Pakistan is also higher (12.77%).

As was mentioned in evidence today, the IMF states that revenues for Pakistan were above 15% as recently as 2007. While tax revenue has more than doubled since then, it has still fallen by 2.5 percentage points as a proportion of GDP. The assertion that revenue has fallen from above 15% to below 10% of GDP, however, seems to mix IMF data (for 2007) with World Bank data (for 2011), and I believe overstates the extent of the decline.

To reiterate, I do not claim to be an expert in this area and defer to those with greater expertise (and, in all probability, access to more accurate data sources). However, it does illustrate the difficulty we all have finding easily accessible data that can be relied upon for Pakistan.

I would be grateful if you could add a footnote to the transcript of the evidence session that says something like “The witness subsequently clarified that the data he referred to are drawn from the World Bank’s DataBank, and are for central government revenue.” I would also be glad if you could also mention this note to the Committee chairman and send him my apologies for any confusion I may have caused today.

WORLD BANK & IMF TAX REVENUE DATA

WORLD BANK WORLD DEVELOPMENT INDICATORS DATABASE1

Tax revenue as a percentage of GDP2

2007

(%)

2008

(%)

2009

(%)

2010

(%)

2011

(%)

2012

(%)

Bangladesh

8.05

8.82

8.60

-

-

-

China

9.93

10.27

10.54

-

-

-

India

11.89

10.75

9.80

9.73

-

-

Pakistan

9.84

9.86

9.28

10.02

9.31

-

Definition: Tax revenue refers to compulsory transfers to the central government for public purposes. Certain compulsory transfers such as fines, penalties, and most social security contributions are excluded. Refunds and corrections of erroneously collected tax revenue are treated as negative revenue.

Tax revenue (current LCU)3

2007

(Billions)

2008

(Billions)

2009

(Billions)

2010

(Billions)

2011

(Billions)

2012

(Billions)

Bangladesh

380

481

529

-

-

-

China

2,639

3,225

3,593

-

-

-

India

5,932

6,052

6,330

7,465

-

-

Pakistan

853

1,010

1,181

1,483

1,679

-

Definition: Tax revenue refers to compulsory transfers to the central government for public purposes. Certain compulsory transfers such as fines, penalties, and most social security contributions are excluded. Refunds and corrections of erroneously collected tax revenue are treated as negative revenue.

IMF WORLD ECONOMIC OUTLOOK DATABASE 20124

General government revenue as a percentage of GDP

2007

(%)

2008

(%)

2009

(%)

2010

(%)

2011

(%)

2012

(%)

Estimates start after

Bangladesh

10.82

11.28

10.85

11.51

12.04

13.12

2010

China

19.80

19.66

20.01

20.19

22.34

22.84

2011

India

21.81

20.30

19.52

18.82

18.46

18.79

2010

Pakistan

15.30

14.94

14.72

14.36

12.77

12.77

2011

Definition: Revenue consists of taxes, social contributions, grants receivable, and other revenue. Revenue increases government’s net worth, which is the difference between its assets and liabilities (GFSM 2001, paragraph 4.20). Note: Transactions that merely change the composition of the balance sheet do not change the net worth position, for example, proceeds from sales of nonfinancial and financial assets or incurrence of liabilities.

General government revenue in local currency

2007

(Billions)

2008

(Billions)

2009

(Billions)

2010

(Billions)

2011

(Billions)

2012

(Billions)

Estimates start after

Bangladesh

511

616

667

799

948

1,206

2010

China

5,262

6,173

6,821

8,105

10,533

11,989

2011

India

10,398

11,060

11,850

13,840

15,745

18,208

2010

Pakistan

1,327

1,530

1,872

2,130

2,306

2,670

2011

Definition: Revenue consists of taxes, social contributions, grants receivable, and other revenue. Revenue increases government’s net worth, which is the difference between its assets and liabilities (GFSM 2001, paragraph 4.20). Note: Transactions that merely change the composition of the balance sheet do not change the net worth position, for example, proceeds from sales of nonfinancial and financial assets or incurrence of liabilities.

January 2013

References

1 http://databank.worldbank.org/ddp/home.do

2 Sources listed by World Bank: International Monetary Fund, Government Finance Statistics Yearbook and data files, and World Bank and OECD GDP estimates

3 Sources listed by World Bank: International Monetary Fund, Government Finance Statistics Yearbook and data files

4 http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/index.aspx

Prepared 3rd April 2013