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October 17, 2019

Tax collection under one umbrella: IMF to recommend National Tax Collection Agency

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October 17, 2019

ISLAMABAD: The visiting IMF team is all set to recommend to the government for setting up a National Tax Collection Agency for the purpose of filing and collection of all taxes of federal and provincial domains under one umbrella.

Top official sources confirmed to The News on Wednesday that owing to non-clearance of security of visiting IMF technical team, they are not going to visit any other city during their two-week stay.

The visiting IMF team is not going outside the federal capital so they have fixed meeting with Punjab Revenue Authority (PRA) high-ups next week here in Islamabad to hold threadbare discussion on fiscal arrangement among the Centre and the provinces. “The visitingIMF technical team will also hold meetings with Ministry of Climate Change to find out possibilities to impose any pollution related tax in future,” said the official.

When contacted to FBR Chairman Shahbar Zaidi for seeking his comments, he said that the visiting IMF technical team talked about need of harmonised tax collection in their initial discussions. It can be done within the existing arrangement of having separate tax collection mechanism at the federal and provincial levels, the FBR chairman added.

However, the sources said that the visiting technical team comprising four experts from IMF’s headquarters and three from Fund’s Resident Office in Islamabad sought data related to taxes before their arrival in Pakistan. The visiting team shared their initial thoughts with FBR high-ups at start of this week and pointed out that fragmented taxation system was causing hurdles in policymaking and also increasing cost of compliance.

The IMF team, according to the sources, highlighted that the services sector, which contributes around 56 percent in country’s GDP but many services are part of General Sales Tax (GST) falling in domain of the provinces. The agriculture sector having contribution of around 19-20 percent in GDP and it also falls in jurisdiction of provincial governments under the existing constitutional arrangement. How long unfair taxation system could meet growing financing requirements, the sources quoted the visiting IMF team for raising relevant questions.

The FBR high-ups said that only 7.5 percent of GDP share belonged to crop sector contribution in agriculture sector while remaining is livestock sector where the federal government could devise mechanism to collect taxes. Regarding GST on services, the FBR high-ups argued before the visiting IMF team that out of 53 percent contribution of services in GDP of the country, the share of contribution of wholesale and retail stands at 18 percent and it falls in domain of the Centre to treat it as goods and impose GST on it. There are certain numbers of services, which are in the purview of the provinces.

“In next one or two years period, there will be need to move towards establishment of National Tax Collection Agency where the provinces possessed representations in a bid to harmonise whole taxation starting from filing to paying due amounts on all taxes under one umbrella,” said the official.

The visiting IMF team is supposed to stay for two weeks so they would be here in Islamabad next week. The IMF team would also hold meeting with representatives of Ministry of Health, Climate Change and provincial revenue authorities before their departure,” added the official.

The IMF technical team would finalise its recommendations in next one and a half months and then it would be shared with Pakistani authorities.

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