The International Monetary Fund (IMF) wants more measures and steps from the government to increase the revenue collection. IMF has asked the government of Pakistan to take further measures to increase the revenue collection on short term basis in order to stabilize its economy. Pakistan is seeking a multi- billion loan from IMF. The negotiations are still going on to finalize the conditions of the loan.
The IMF has taken a cautious approach towards the mini budget tabled by the government in the parliament. The IMF’s Resident Chief in Pakistan Teresa Daban Sanchez said in her comments that the IMF was still evaluating the reform package. “Our understanding is that it includes a set of tax, administrative and regulatory measures aimed at lifting distortions that could foster private sector activities. Further measures are needed to increase revenue collection in the short term to support efforts to stabilize the economy,” she said.
The tax authorities have already been facing a shortfall of RS158 billion in the first 6 months of current financial year. The tax measures proposed in the new money bill will cause more loss in the tax collection. The federal government is likely to lose another Rs 7 billion as the result of mini budget.
The government has kept the target of annual tax collections at Rs 4,398 billion for the current fiscal year 2018-19. The government is hoping to collect more taxes in the second half of the current fiscal year. The finance ministry and FBR top officials are confident to achieve the revenue collection target at the end of the financial year.
The FBR undertook crackdown against high net worth individuals on the basis of certain parameters for owning property of over Rs20 million, possession of vehicle above 1800cc and having annual rental income of Rs10 million. So far, the FBR has sent 3,121 notices to high net worth individuals in four phases out of which it has received 154 tax returns with tax collection of Rs21.1 million.
The FBR official said the database with the help of other agencies was being developed to identify high net worth individuals on the basis of consumption pattern to determine whether they were living luxurious life after which more tax notices would be served.
With the envisaged budget deficit target of 5.1 percent of the GDP, the FBR will have to gear up its efforts to achieve the desired tax collection target despite the fact that expenditures will balloon in the wake of pressing requirements of increased burden of debt servicing in the wake of devaluation of rupee against dollar.
How the government is going to achieve the desired budget deficit target is yet to be seen but so far it is highly unlikely to restrict the budget deficit at the desired level of 5.1 percent of GDP, keeping in view the shortfall in tax and non-tax revenues and ballooning of expenditures.
The government is left with no other option but to jack up the budget deficit target from 5.1 percent to 5.6 percent of GDP for the ongoing fiscal year,” said the sources, and added that it might go up over 6 percent of GDP by end June 30, 2019.
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17 November, 2019