Charter of the Economy The bulk of the increase of 2.25% of the GDP is proposed indirect taxes. This will raise the share of direct taxes from 40% currently to almost 50% and make the tax system markedly more progressive. Similarly, the incremental effort will be larger by the Provincial Governments. The Provincial tax-to-GDP ratio currently is only 0.75% which will need to be raised by 133% to 1.75% of the GDP. The Federal tax-to-GDP ratio will be targeted to increase to 10.25% of the GDP from 8.25% of the GDP. The direct tax reforms proposed in the Financing Plan of the Charter are presented in Chart 14.1. Chart 14.1: Tax Reforms by the Federal and Provincial Governments as part of the Financing Plan Potential Revenue (% of GDP) DIRECT TAXES Federal Governments 1. Conversion of Fixed and Final Taxes into Advance Tax and Merger of Income into Total Taxable Income 0.500 2. More Progressive Corporate and Personal Income Tax 0.250 3. Tax on Capital Gains on Land and Property Sales Irrespective of the Holding Period 0.250 4. Advance Tax on Share Transactions 0.125 5. Withholding Tax on Electricity Bills of Traders and large domestic consumers 0.250 6. Reduction in Tax Credits and Exemptions 0.125 TOTAL 1.50 Provincial Governments 1. Higher rates of Agricultural Income Tax 0.375 2. Higher assessed GARVs for Property Tax 0.375 TOTAL 0.75 OVERALL TOTAL 2.25 The indirect tax reforms are presented in Chart 14.2. 113