Provincial post 18th Amendment Revenue Analysis with focus on GST on services in Baluchistan

Abstract

This thesis undertakes an in-depth exploration of the untapped tax potential in STS in Balochistan, which is collected by BRA. The bottom-up approach, using microeconomic data HIES, which calculate Tax base and then applying tax rate on that give tax potential, is used. It tells that in 2016 and 2019, Baluchistan’s highest provincial tax potential came from the food, tailor, and transport sectors, generating between Rs. 1,000 million and Rs. 4,819 million. Conversely, sports, laundry, and healthcare sectors yielded lower tax revenue, ranging from Rs. 213 million to Rs. 723 million. But BRA, covers only food sector still with high Tax gap. BRA's top ten sectors in STS, the leading four are: "Telecommunication" leads with Rs. 15,057 million, followed by "Others" at Rs. 10,125 million. "Contract Execution" and "Consultant" sectors also perform well, contributing around Rs. 5,942 million and Rs. 5,607 million, respectively. Conversely, In BRA's STS analysis of the bottom ten sectors, the four sectors stand out. Firstly, the "Warehouse" with revenue of Rs. 1,015,916. In second place is the "Guest Houses", with revenue of Rs. 819,728. In the third position, the "Sports" has generated Rs. 84,000, while the "Tracking Services" occupies the fourth spot with revenue of Rs. 22,780. The research also delves into comparative analysis of Authorities in sales tax services collection, SRB consistently excels, achieving revenue targets accurately. KPRA and PRA perform satisfactorily with minor revenue fluctuations. BRA faces challenges in meeting revenue targets, indicating a need for improved forecasting and tax collection strategies. It also highlighted pre amendment scenario, when Sales Tax services were initially collected by FBR from 2001 to 2010, the average growth rate was 26%, while in post-amendment period, from 2015 onwards, when BRA started collection the average growth rate was 47%. Additionally, in case of tax decentralization, it's crucial for regional governments to have one significant own revenue source, supported by equitable balancing of tax capacities and expenditure needs. Local fiscal autonomy requires local governments to control tax rates and bases. Similarly , according to Provincial revenue assignment as per constitutional provision STS is provincial matter. Lastly, the policy recommended that BRA should focus on taxing vital sectors like Infrastructure, Agriculture, Wholesale, and Industry, while supporting private sector growth through increased development expenditure. Embrace technology like e-invoicing, enhance staff expertise, expand offense categories and penalties, harmonize tax rates, and target neglected sectors like "Doctor," "Beauty," "Tailor," "Sports," "Washing," and “Transport” for higher revenue and economic growth.