The tax-to-GDP ratio is used to measure a country’s tax revenue relative to the size of the economy. The ratio is an important tool to measure tax revenue and how much a country can spend on its different development projects. Moreover, the figure can also provide direction to a country’s tax policy and help benchmark performance to international standards.
Currently, Pakistan’s tax-to-GDP ratio stands at 10.9%. Recently, the Finance Minister announced to increase the government’s tax-to-GDP to 20%. An increased tax-GDP ratio will translate into a better standard of living for the citizens as it enables the government to commit more funds to social development.