The demand comes amid concerns that the tax to GDP ratio will be low even if the FBR hits its annual targets.
ISLAMABAD:
Despite a healthy momentum in revenue generation, the International Monetary Fund (IMF) has called on Pakistan to impose an additional tax of Rs 600 billion and reiterated its call for Islamabad to set up an anti-corruption task force.
IMF urges Pakistan to collect more taxes
But authorities have yet to heed calls for higher taxes amid high double-digit inflation. This is one of the main reasons behind the disappearance of the ruling coalition's political fortunes and the popularity of the opposition in the political heartland. It was presented to Pakistani authorities by Nathan Porter, head of the IMF's mission to Pakistan, along with the six conditions, government sources said.
The issue will be discussed at the next program review talk scheduled for November, a source told The Express His Tribune.
The IMF believes that if inflation-led nominal economic growth hits close to 25% this year, tax rates will fall below agreed levels even if the FBR exceeds its annual target of INR 7,470 trillion. I'm here.
At the time of the budget, the government had estimated the size of GDP at 78 trillion rupees, based on an average inflation rate of 11.5% and economic growth of 5%. The annual tax target of Rs 7.47 trillion is almost 9.6% of GDP.
However, due to various administrative actions, devaluation of the rupee, floods and food crises, average inflation is now estimated at 23% and GDP growth at around 2%. After the spike in inflation, the projected size of GDP for this financial year is estimated at Rs83 trillion.
Despite achieving the FBR's annual target of Rs 7,470 billion, the tax to GDP ratio will drop to around 8.9.
To stick to the goals of the macroeconomic framework, the IMF estimated that Pakistan may need to take additional revenue measures of her 0.75% of her GDP.
The Government has set an annual tax revenue target for the FBR of Rs 7,470 trillion. This requires a 22% growth rate from last year's tax revenue. FBR raised INR 1.61 trillion in Q1, exceeding its target by more than INR 26 billion. However, collection growth is 17%, well below typical inflation.
Inland Revenue Policy member and spokesman Afaque Qureshi said:
It is highly unlikely that the Pakistan Democratic Movement Coalition will comply with such demands. The largest party in the coalition, his PML-N, has already suffered the most in votes and popularity due to the rising cost of living.
According to sources, one of the options offered by the IMF was to impose a consumption tax on petroleum products, but Finance Minister Ishaq Dar said he did not accept any specific tax recommendations from the IMF. .
The Government currently imposes a petroleum tax of Rs 47.50 per liter on petrol and approximately Rs 7.58 per liter on diesel. The IMF also has an agreed plan to collect a petroleum levy on the government that guarantees a levy of Rs 50 per liter of gasoline in January 2023 and Rs 50 per diesel vehicle by March 2023. asked to stick to.
The government is already trying to set a cap on gasoline, but to get things on track, it will have to start increasing taxes on diesel next month.
Sources said the IMF had asked Pakistan to designate an anti-corruption task force, to which the government agreed in June this year.
Pursuant to this agreement, Pakistan will establish by January 2023 an anti-corruption policy led by the National Accountability Board (NAB) by a task force that includes independent experts with international experience and civil society organizations. We plan to publish a comprehensive review of the institutional framework.
According to the agreement, the Task Force will also recommend appropriate structural reform measures to strengthen the independence of anti-corruption institutions, prevent political interference and prosecution, and ensure transparency and accountability for abuses.
The name of former Prime Minister Shahid Khaqan Abbasi was suggested to lead the task force before Finance Minister Ishaq Dar joined, sources said. However, no decision had been made yet.
Former Minister of Finance Mikhta Ismail said, "While Shahid Kakan Abasith Nehm had been proposed to lead the task force, an international expert with a strong legal background, preferably New Zealand or Singapore I think the committee should be chaired by a person from the United States." It is assumed that these countries have a very low prevalence of corruption in their societies.