World Bank’s $400m loan to help raise tax-to-GDP ratio

ISLAMABAD: The World Bank’s (WB) loan of $400 million for FBR will target raising the tax-to-GDP ratio to 17 percent by financial year 2023-24 and widening the tax net from the current 1.2 million to at least 3.5 million active taxpayers.

It was informed during a meeting between Adviser to PM on Finance and Revenues Dr Abdul Hafeez Shaikh and Vice President of World Bank Ms Ceyla Pazarbasioglu.

Dr Abdul Hafeez Shaikh said that Pakistan valued the financial and technical support provided by the World Bank for the institutional reforms and economic development of the country.

Ms Ceyla Pazarbasioglu is the Vice President for Equitable Growth, Finance and Institutions (EFI) at the World Bank Group (WBG). She oversees a portfolio of nearly $30 billion of operational and policy work. She was accompanied in the meeting by Illango Patchamuthu, WB Country Director.

During the meeting, the adviser appreciated the support being provided by the World Bank to Pakistan and highlighted the government’s focus on expediting speedy rollout of the World Bank projects and actions being taken in this regard.

Ms Ceyla Pazarbasioglu appreciated the economic reforms programme initiated by the government to stabilise the Pakistani economy and accelerate broad-based growth. The World Bank team also congratulated the adviser on the improvement of the ranking of the Ease of Doing Business (EODB).

The World Bank team discussed with the adviser the Resilient Institutions Strengthening Programme (RISE). This includes an integrated Debt Management office in the Finance Division. The meeting also focused on areas of harmonisation of tax regime, circular debt strategy and National Tariff policy matters.

The World Bank team apprised the adviser on World Bank assistance being provided to harmonise the sales tax across Pakistan to further improve the business environment and enhance revenue collection. In this regard the adviser was also updated on the progress under the $400 million Pakistan Raises Revenue Project which aims to strengthen the Federal Board of Revenue (FBR) and create a sustainable increase in Pakistan’s domestic tax revenue. The project will target raising the tax-to-GDP ratio to 17 percent by financial year 2023-2024 and widening the tax net from the current 1.2 million to at least 3.5 million active taxpayers.

The project will assist in simplifying the tax regime and strengthening tax and customs administration. It will also support the FBR with technology and digital infrastructure and technical skills. The government has set improving tax revenue with low compliance costs as a high priority.