Tax reform project GIZ governance program

Terms of Reference Study on Macroeconomic impacts of RGST

Introduction A General Sales Tax (GST) has been introduced in Pakistan already in the 90s. Though initially a general pre-tax deduction was envisaged, the GST is currently levied at differentiated rates of 17% to 26% mainly at the end of the value-added chain with many goods or even sectors being exempted. The planned RGST shall unify the tax bases of goods and services, bring previously untaxed sectors into the tax net and enhance the systems equity by levying a single tax rate of 15% on all goods and services with few, targeted exception (e.g. staple foods and health care products). Furthermore, the reformed sales tax should adopt the elements of worldwide more common value-added tax (VAT). However, the political will to implement such tax reforms has been largely undermined by protests from various interest groups. Currently, the introduction of the reform is still pending. Contents The study will support the Ministry of Finance and the Federal Board of Revenue in ongoing political discussions and to identify macroeconomic impacts of RGST. The macroeconomic impact study will investigate indirect effects of the reform on inflation and growths. It will analyse impacts on growth by measuring the shares of GDP of affected sectors and estimate the resulting overall development of GDP. In this regard reasons for the decreasing tax share of GDP over time should be given and actual figures should be compared with those of a fully fledged and effective VAT system. The study will include a tax incidence analysis to examine which sector will be affected most and what is the effect on the poorest population groups. It will analyse direct effects on investments in the relevant sectors, shifts to similar industries and revenue potential of the reform. Further, the study should make an attempt in estimating the size of the informal sector which is presently not under the tax net by taking factors into account like gas or electricity expenditures or labor force survey results. The study shall analyze the GST tax gap and make it available for disaggregated sectors. Structure The study should either contain a maximum five pages executive summary or in addition to the study a short paper, which transforms the findings as well as the (statistical) analyses in a Tax reform project GIZ governance program nontechnical language for the political discussion. Besides that, the study should contain a chapter on policy implications and recommendations for MOF and FBR. Deliverables Besides the written report in English language not exceeding 60 pages, a nontechnical short paper (or optional an executive summary), a summary of the report on presentation slides and one presentation of the interception study (on request) and one presentation of the final report to FBR (on request) have to be delivered. The report will be produced in close coordination (or partly even co-authorship) with GIZ personnel.

Tax reform project GIZ governance program

Procedural Applicants must send Technical & Financial Proposal in separate sealed envelopes, both enclosed in an envelope under the subject Proposal for Tax Research Studies to Procurement Unit, GIZ Country Office, House No. 23, Street No. 55, Sector F-7/4, Islamabad, Pakistan until 13th March 2011. Incomplete and delayed proposals and those that materially deviate from the instructions will not be considered for evaluation. Applicants should describe the composition of their research team and attach their CVs. The proposal should include a description of the methods to be applied with references to the relevant key literature; applicants should also indicate the main data sources they are planning to use. The proposal should give a timeframe for the processing of the work, including the provision of the: outline of the concept/structuring until 27th March 2011 inception report until 10th April 2011 presentation of the inception report to FBR (if requested) in 3rd week of April 2011 final report until 8th May 2011 presentation of the final report to FBR (if requested) in 3rd week of May 2011