The cluster aims to provide evidence to strengthen the fiscal compact between governments and citizens in Pakistan and provide a knowledge base for other developing countries facing similar fiscal challenges. The fellows in this cluster are currently engaged in a range of projects that involve issues related to property taxation, taxation on services, income taxation, and public procurement.
Public Finance is one of the major pillars of state effectiveness. Governments need access to resources to carry out their functions and provide public services. In this context, governments need efficient and equitable ways of raising revenues while maximizing the effectiveness of expenditures. Doing so is particularly difficult in fiscally-constrained countries such as Pakistan, where the tax to GDP ratio is a mere 11 percent compared to 40 percent in some of the advanced economies. The problem of a limited fiscal base is further aggravated by inefficiencies and wastages on the spending side.
In collaboration with the Federal Board of Revenue (FBR), the Fellows are exploring ways to support the FBR’s efforts to broaden and deepen the tax base. The research is currently exploring plans for behavioral interventions with taxpayers and then evaluating their success. After fleshing out the details of the strategy, the hope would be that this could become an important pillar in discussions with the IMF and the World Bank so that the Government of Pakistan has the time to roll out a clear plan for domestic revenue mobilization.
In the environment of limited fiscal space, public expenditures must be carried out in the most efficient manner possible while ensuring effective service delivery to avoid red tape, incompetence, and corruption at various stages. The Fellows are closely collaborating with multiple departments of the Government of Punjab to introduce e-procurement in the province and increase the effectiveness of service delivery.