The International Monetary Fund (IMF) is demanding an increase in Personal Income Tax (PIT) and Corporate Income Tax (CIT) and the removal of GST inefficiencies for the resumption of the loan facility.
The global financial regulator has sought improvements in enforcing regulations and implementing a long-term revenue collection strategy to help improve economic metrics, according to Chairman FBR, Dr. Ashfaque Ahmed.
According to the Chairman FBR, the Bureau was initially employed to report recoveries in local currencies because the Ministry of Finance wanted foreign funds to meet its financial commitments. Regarding the IMF’s latest demands, he said,
The reforms in Personal Income Tax are among the demands of the IMF, as currently, the country is under the Fund program. We will be soon bringing reforms in Personal Income Tax and removing distortions in GST.
He explained that the rupee component was granted through extra grants and that the FBR was handed Rs. 2.5 billion in May 2021 when there was not enough time to use the resources in the previous fiscal year.
He said that the FBR was facing various issues as a result of the fragmented fiscal base, which he said was caused by the fact that there were different constitutional jurisdictions. For instance, Agriculture Income Tax (AIT) and GST on services are collected by the provinces. The FBR has offered to share the data with the provinces and has requested permission to collect the AIT on their behalf, but the federating units have yet to respond, he remarked.
All problems aside, the FBR chairman stated that he was not personally in favor of borrowing $400 million from the World Bank (WB) to overhaul the tax machinery as part of the Pakistan Raises Revenues (PRR) program, but the Ministry of Finance required foreign cash, and thus they extended assistance to it.
The loan facility is cheap, but it is vexing that the funds would be focused to overhaul the FBR, he added.