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World Bank Applauds KP Revenue Project for Tax Collection

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The implementation of the Khyber Pakhtunkhwa (KP) Revenue Mobilization and Public Resource Management Project (KPRMP) has yielded significant results, particularly in the realm of tax revenue collection. According to a World Bank result brief, the project has substantially increased tax revenue for the government of KP, enabling an expansion of public services to areas previously impacted by fragility and conflict, such as the former Federally Administered Tribal Areas (FATA).

The project has been instrumental in enhancing transparency in public financial management, which has played a crucial role in rebuilding the social contract in the region. One of the key achievements highlighted is the increase in tax revenue collection from a baseline of $99.4 million in fiscal year 2019 to $216 million in fiscal year 2022. This remarkable growth not only exceeded the project’s initial target but also surpassed the total initial investment by the International Development Association (IDA).

An important aspect of this revenue increase is the improvement in filing compliance of Services Sales Tax, which rose from 51 percent at the baseline to 77 percent in fiscal year 2022. Additionally, the project facilitated the updating, digitization, and linking of Urban Immoveable Property Tax records of six cities with GIS maps, resulting in a 54 percent expansion of the tax base.

The rise in revenue has created fiscal space for the Government of KP to allocate more funds to priority sectors like health. For instance, the health allocation in the provincial budget increased from $320 million in fiscal year 2019 to $597 million, including a 10 percent budget for the newly merged districts in fiscal year 2023. This has supported the provision of universal health insurance through the Sehat Card Plus program.

Moreover, the project has contributed to strengthening public financial management by significantly reducing the allocation of resources to unapproved projects, from 49 percent in fiscal year 2018 to 22 percent in fiscal year 2023. Additionally, 90 out of 113 Tehsil Municipal Authorities are now using the new Financial Management Information System, enhancing transparency in recording revenue and expenditures.

Overall, the IDA-financed KPRMP has not only improved revenue mobilization and public resource management in KP but has also helped the government sustain its operations and finance emergency responses during crises such as the COVID-19 pandemic and the 2022 floods.

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