Agenda of Federal Tax Reforms The existing income tax-to-income ratios has been derived in Table 9.9 below, based on estimates by FBR of collection from different sectors of the economy. The lowest ratios are observed in large sectors like wholesale and retail trade, transport and communications and private services. Table 9.9: Income Tax Collection by Sector – FY 2018-19 (Rs in Billion) Revenue GDP Contribution Manufacturing 453.7 4294.8 Construction 235.7 734.1 Electricity and Gas 63.9 534.7 Mining and Quarrying 0.6 964.6 Transport and Communication 77.6 3900.5 Wholesale and Retail Trade 263.0 6803.7 Banking and Insurance 152.2 915.0 Private Services 198.1 4000.0 TOTAL 1445.0 22147.4 Effective Rate (%) 10.6 32.1 12.0 0.0 2.0 3.9 16.6 5.0 5.4 The proposed withholding tax system on electricity bills for commercial establishments, engaged in wholesale and retail trade and other services is as follows: Exemption limit Rs 1,001 – 5,000 Rs 5,000 – 15,000 Rs 15,000 and above Size of Monthly Electricity Bill Rs 1,000 5% 7½% 10% Some changes have been introduced in this withholding tax in the latest Budget. However, a stronger move is required. 9.6. Indirect Tax Reforms The share of indirect taxes, inclusive of income withholding taxes, is very high in Pakistan at 82% and it has been increasing in recent years. Therefore, the focus should be more on broad-basing and reduction in tax rather than on enhancement of tax rates. The implementation of direct tax reforms described above should be followed by a reduction in the general sales tax rate to 15 percent. 105