Islamabad: Despite a healthy pace in revenue generation, the International Monetary Fund (IMF) has asked Pakistan to impose additional taxes of around Rs 600 billion and has again urged Islamabad to set up an anti-corruption task force.
However, the authorities concerned are yet to accede to the demand for more taxes amid high double-digit inflation – key factors behind the evaporation of the ruling coalition’s political fortunes and opposition’s popularity in the political capital. is one of the.
According to government sources, these demands were presented to Pakistani officials by the IMF’s mission chief in Pakistan, Nathan Porter, along with half a dozen other conditions during recent talks in Washington.
Sources told that the matter will be discussed in the next round of program review talks, expected in November.
The IMF believes that the economy’s nominal growth of around 25% due to inflation in the current fiscal year will bring the tax-to-GDP ratio below target even if the FBR’s annual target of Rs. get it 470 trillion according to sources.
At the time of the budget, the government estimated the GDP volume at Rs 78 trillion based on an average inflation rate of 11.5 percent and an economic growth rate of 5 percent. The annual tax target of Rs 7.470 trillion is equivalent to about 9.6 percent of GDP.
However, due to various administrative measures, rupee devaluation, floods and food supply shocks, average inflation is now estimated at 23 percent and GDP growth around 2 percent. After inflation, GDP is estimated at Rs 83 trillion for the current fiscal year.
This will bring the tax-to-GDP ratio to around 8.9% despite achieving the FBR’s annual target of Rs 7.470 trillion.
According to sources, to stick to the macroeconomic framework targets, the IMF has estimated that Pakistan may have to take additional revenue measures equivalent to 0.75 percent of GDP, which translates to over Rs 600 billion. Is.
The government has set the FBR’s annual tax collection target at Rs 7.470 trillion, which requires a growth rate of 22 percent over last year’s collection. The FBR collected over Rs 1.61 trillion during the first quarter, surpassing its target of Rs 26 billion. But the overall growth rate was 17% which is significantly lower than the current inflation rate.
Inland Revenue Policy Member and Spokesperson Afaq Qureshi said that the FBR is not considering any proposal to levy more taxes.
It is very unlikely that the coalition government of Pakistan Democratic Movement will accept this demand. The main coalition party Muslim League (N) has already suffered the biggest hit in its vote bank and popularity due to the ever-increasing inflation.
Sources said that one of the options given by the IMF was to impose a sales tax on petroleum products, but Finance Minister Ishaq Dar did not accept any of the IMF’s tax recommendations.
The government currently levies a petroleum levy tax of Rs 47.50 per liter on petrol and around Rs 7.58 per liter on diesel. The IMF has also asked the government to stick to its plan to impose a petroleum levy, which has guaranteed a Rs 50 per liter levy on petrol in January 2023 and a Rs 50 per liter levy by March 2023. .
The government is already close to the maximum limit on petrol but now has to start raising taxes on diesel from next month to stay on track.
Sources say that the IMF has also urged Pakistan to notify the anti-corruption task force, which the government agreed to in June this year.
According to the agreement, by January 2023, Pakistan will publish a comprehensive review of its anti-corruption institutional framework, particularly the National Accountability Bureau (NAB) — with the participation of independent experts with international experience and civil society organizations. through a task force.
According to Deal, the task force will also recommend appropriate structural reform measures that strengthen the independence of anti-corruption institutions, prevent political influence and persecution, and provide transparency and accountability controls against corruption.
Sources say that the name of former prime minister Shahid Khaqan Abbasi was suggested to head the task force before Finance Minister Ishaq Dar joined. But no decision was made.
Former Finance Minister Miftah Ismail said, “The name of Shahid Khaqan Abbasi was suggested to head the task force but I thought that an international expert with a strong legal background, preferably from New Zealand or Singapore, should be the body. should be headed.” In these countries, the trend of corruption in the society is considered very low.
