IMF asks govt to increase tax collection up to Rs100 bn

ISLAMABAD:The parleys between Pakistan and the visiting IMF mission have entered into a crucial phase as the Fund asked the government for increasing the FBR’s tax collection by Rs100 billion to materialise the real potential of the tax collection machinery.

“The IMF wants to increase the FBR target by Rs70 to Rs100 billion as discussions are underway to finalise the target in line with the real potential of the FBR. The IMF mission has expressed dissatisfaction over the FBR move to broaden the tax base through issuing notices to high net worth value individuals,” official sources privy to the ongoing talks between Pakistan and IMF teams confided to The News here on Thursday.

The ongoing talks have entered into a critical phase where both sides will have to evolve a consensus on the macroeconomic and fiscal framework (Mefp). The final round of the discussion will kick-start from coming Monday and will continue for next two to three days.

“The financing of the programme will be standing in the range of $5 to $6 billion as it is the due amount Islamabad has to pay back to the IMF on account of previous loans obtained during the tenure of the last PML-N-led regime,” said the official.

The generated tax demand could actually bring few billion rupees to the maximum so there is no real potential for increasing the tax to GDP ratio through this ongoing campaign. The FBR will have to change its policy to make the exercise of broadening of tax base successful. The IMF team knew very well that the FBR sent out 300,000 tax notices during the last IMF programme in three years but it fetched only a couple of billions of rupees into the national kitty as taxes.

When the FBR officials were reminded about the failure of the last scheme which was launched under the IMF programme from 2014-15 to 2016-17, the official said the programme was not pursued effectively that resulted into meeting with failure. An FBR official said the Ministry of Finance would now finalise FBR tax collection target as the tax machinery did not even know how to collect the original target of Rs4,398 billion at a time when the tax machinery is facing a shortfall of around Rs60 billion in the first four month (July-Oct) period of the current fiscal year.