The new government won’t need to introduce a mini-budget despite missing tax targets for the last two consecutive months, as the Federal Board of Revenue (FBR) has assured it will achieve the annual target of over Rs9.4 trillion without additional measures. The chances of immediately introducing a scheme to impose income tax on retailers have also diminished, as Finance Minister Muhammad Aurangzeb decided to further scrutinise the plan.
The FBR’s assurance about achieving the annual target comes amid the government’s hopes of securing a deal with the International Monetary Fund (IMF) on Monday for the final $1.1 billion loan tranche. Finance Minister Aurangzeb took a briefing from the tax machinery on the status of tax collection and various digitisation initiatives. The finance minister also urged the FBR to expand the tax base through investment in technology instead of seeking to fill around 5,000 vacant positions.
The briefing coincided with the IMF mission landing in Pakistan to conduct the second review of Pakistan’s economy for October-December period under the $3 billion Stand-By Agreement. The Ministry of Finance announced that Pakistan has met all structural benchmarks, qualitative performance criteria, and indicative targets for the successful completion of the IMF review. This will be the final review of the Stand-By Arrangement, with a staff-level agreement expected afterward, said the ministry.
The finance ministry said that the second review of Stand-By Arrangement with IMF is scheduled from March 14 to March 18, 2024, in Islamabad. Once staff level agreement is reached, the final tranche of $1.1 billion will be disbursed, following the approval of the Executive Board of the IMF, it added.
Read: K-P Assembly approves Rs159b March budget
Earlier, the finance minister expressed Pakistan’s interest in securing a longer and larger IMF loan programme. Chairman FBR Amjad Zubair Tiwana briefed the finance minister on the status of tax collection, assuring that the annual target could be achieved without additional revenue measures.
Although the FBR collected Rs5.83 trillion in taxes and achieved the eight-month target, it had missed the last two months’ targets. The FBR believes it has justification for these misses, and the IMF would not push hard to introduce a mini-budget.
The finance minister was also briefed about various initiatives, including a plan to bring retailers into the next net through a simple tax scheme. Aurangzeb did not immediately give a go-ahead to the scheme, but said that it would be further examined. The FBR chairman said in the meeting that the retailers’ scheme may initially be used as a source for the registration of the retailers instead of using it as a tool to enhance tax collection.
The finance minister instructed the FBR to bifurcate the data of the 3.5 million retailers between big and small – as over 3.2 million of them remain outside the FBR’s tax net.
During last week’s meeting, Prime Minister Shehbaz Sharif also asked the FBR to focus on wholesalers and distributors instead of narrowing down solely on retailers. According to the Ministry of Finance statement, Aurangzeb said that the government was considering strategies to broaden the tax base by incorporating wholesale, retail, real estate, and agriculture sectors into the tax framework.
The FBR raised the issue of about 5,000 vacant positions in the FBR and sought to hire people, asking to increase their budget equal to 0.8% of the annual collection. However, the finance minister urged the FBR to see whether the investment should be made in human resources or technology. He also directed to strengthen the point of sale and track and trace initiatives, which have so far failed to deliver the desired results. He sought separate briefings on these initiatives.
The finance minister praised the Custom Department’s Single Window initiative, which has been implemented to digitally link various stakeholders involved in international trade.
The finance ministry stated that Aurangzeb stressed the urgent need for digitising the FBR to enhance transparency and efficiency in tax collection. These initiatives would focus on enhancing tax collection through improved FBR governance, comprehensive documentation of the economy, and full-scale digitisation, according to Aurangzeb.
The finance minister also stated that digitisation is a means to an end and implementing digital solutions is pivotal to modernising our tax administration.
He said that by leveraging technology and enhancing transparency, we can build a more equitable tax system that fosters economic growth and benefits all citizens.
The finance minister pledged the government’s support in implementing transformative measures.
Published in The Express Tribune, March 14th, 2024.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ