PHOTO: REUTERS
ISLAMABAD: An International Monetary Fund (IMF) delegation on a visit to Pakistan to evaluate Islamabad’s performance for the third tranche of $450 million of the $6 billion bailout package will resume talks with government officials after a two-day break from Monday (today).
The three sessions of talks on Monday will start at 9am and last till 5pm.
The IMF team will be informed about the progress made by the State Bank, finance ministry, commerce ministry and the FBR on the targets set by the global lender.
Talks between Pakistan and the IMF for the second quarter (October-December) 2019-20 began on February 3. Finance Adviser Dr Abdul Hafeez Shaikh kicked off the review talks with his counterpart Ernest Rigo, the IMF’s Washington-based mission chief.
FBR authorities are resisting the IMF’s demand for a mini-budget. They are seeking a steep cut of nearly Rs800 billion in its original target of Rs5.5 trillion.
The IMF has already lowered the target to Rs5.238 trillion and is not inclined to give any further relaxation until Pakistan takes additional measures.
Pakistan is required to take additional revenue measures to the tune of nearly Rs200 billion aimed at achieving an under discussion revised tax collection target. In July last year, the IMF had given Rs5.5 trillion tax collection target to the FBR, backed by Rs735 billion tax measures. The new tax measures were equal to 1.7% of the GDP.
However, sources said from July to December of this fiscal year, the net impact of these revenues measures on tax collection was just Rs235 billion or 0.5% of the GDP. The gross collection from these measures was in the range of Rs265 billion but the FBR still has to adjust close to Rs35 billion tax refunds of the zero-rated sectors.
Due to a shortage of time before the close of the fiscal year, the only major revenue spinner that remains is to increase the standard General Sales Tax (GST) rate from 17% to 18%, which is highly inflationary and politically very risky.
But the FBR has not yet seriously considered this proposal, although it remains on the table.
The tax authorities blame sluggish economic growth, reversal of certain tax measures and delay in enforcement of administrative measures like computerised national identity cards. However, there were also questions over the method that the FBR uses to work out the revenue impact of these numbers.
Major revenue spinners during the first six months of the fiscal year remained telephone bills, salary, profit on debt and property transactions. On the sales tax side, collection from petroleum products and textile products helped in raising the additional revenues.
The additional impact of increasing income tax rates for salaried class was Rs25 billion in the first half while the increase in property valuation rates also contributed Rs27 billion more.
However, the net impact of Rs60 billion worth of additional custom duties measures remained negative, although the FBR’s collection from import of LNG significantly improved. The revenue impact of additional custom duties remained negative due to compression of imports.
The FBR missed the first seven months (July-January) revenue collection target by Rs385 billion despite imposition of Rs735 billion record new taxes. However, the FBR still believes it has done a remarkable job in the given economic conditions.
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