Taxation measures: Govt-IMF deadlock still persists

ISLAMABAD: Pakistan and the IMF have not yet reached agreement on next budgetary targets especially taking additional taxation measures to fetch Rs300 billion, hiking petroleum levy and exact timeframe for increasing electricity tariff.

However, top Pakistani authorities are confident that the talks were underway and it would be concluded ahead of coming budget 2021-22, scheduled to be announced after three days on June 11, 2021. “InshaAllah”, we will conclude talks with the IMF ahead of announcement of budget in order to reflect in our budget,” said one top functionary of government on Monday night.

The Special Assistant to Prime Minister on Finance and Revenues Dr Waqar Masood has been playing catalyst role to continue negotiation process so efforts are underway to conclude talks within next 24 hours.

“If differences persist, the talks will continue till approval of budget from Parliament because the government will have opportunity to bring some amendments,“ said one official.

There are some major outstanding issues between the both sides as the IMF wants clear-cut strategy for achieving FBR tax collection target of Rs5.8 trillion. The nominal growth could fetch the FBR target at Rs5.3 trillion if they took the base collection of Rs4.7 trillion for the outgoing fiscal year then the FBR would have to take additional measures to bring remaining Rs480 billion into kitty. The FBR has estimated that the abolishing of tax exemption might fetch Rs80 to Rs140 billion so the IMF is asking for taking measures to bridge the remaining gap to materialise Rs5.8 trillion for next budget.

The next thorny issue is petroleum levy as the IMF envisaged collection of Rs600 billion in coming budget so the government will have to collect Rs30 per litre on POL products with effect from July 1, 2021.

Pak authorities wanted reduction in the petroleum levy in the range of Rs450 to Rs500 billion. On hiking of power tariff, the IMF wants crystal clear roadmap otherwise the circular debt will continue mounting. The government may take decision to increase power tariff from October 2021 but final decision is expected after possible phone call by PM Imran Khan to IMF’s MD in next couple of days.

The SBP’s amendments is another bone of contention as the Ministry of Finance wanted review on it during the parliamentary proceedings. The government does not want breakdown of ongoing talks so they are hopeful that positive outcome will be achieved soon.