FBR seeks closed-door session

Tax authorities brace for tough IMF talks, signalling possible mini-budget

KARACHI:

ISLAMABAD: Pakistan's tax chief on Wednesday requested an in-camera parliamentary committee session to discuss the potential need for a mini-budget to address the tax shortfall against the annual target of nearly Rs13 trillion.

The request was made during a Senate Standing Committee on Finance meeting, where tax authorities affirmed that the annual target of Rs12.97 trillion remains unchanged despite initial setbacks.

Discussions with the International Monetary Fund (IMF) are ongoing, and due to the topic's sensitivity, a briefing cannot be held in an open session, said Federal Board of Revenue (FBR) Chairman Rashid Langrial. He was responding to a question by MQM-Pakistan's Senator Faisal Subzwari about any IMF demand for a mini-budget.

PPP's Senator Saleem Mandviwalla chaired the Standing Committee on Finance.

Langrial stated that the FBR was prepared to provide the briefing in a closed session. He did not confirm nor deny the likelihood of a mini-budget, instead requesting the in-camera meeting.

During an informal discussion following the meeting, a senior FBR official noted that a mini-budget may not be imminent.

For the first half of this fiscal year, the IMF has set a target of a little over Rs6 trillion for the FBR. The FBR has already faced a shortfall of Rs190 billion in the first four months of this fiscal year. Under the agreement with the IMF, if the shortfall exceeds 1% of the target, a mini-budget must be introduced.

Another senior FBR official stated that the Rs12.97 trillion annual target would not be revised in light of discussions with the IMF. The FBR chairman informed the IMF that the shortfall was largely due to inaccurate macroeconomic assumptions.

The FBR briefed the IMF that missed targets were due to slow growth in imports, declining inflation rates, and underperforming policy measures. However, enforcement has also been weak, which, according to Langrial, will improve following the government's approval of a Rs32.5 billion package to boost FBR's capacity and resources.

Tax authorities added that although the Tajir Dost Scheme generated minimal revenue from traders, the community paid around Rs12 billion in income tax, with approximately 600,000 traders filing returns under the normal tax regime. This includes taxes collected under section 236H from unregistered retailers.

The FBR has now informed the IMF that it will target unregistered wholesalers and retailers based on the taxes they paid as unregistered persons.

The IMF was also informed that the FBR will first pursue non-filer wholesalers to ensure due taxes are collected, even with the higher withholding tax charged to non-filers.

Pakistan's marginalised salaried class paid Rs111 billion in income tax in three months—an increase of 56%.

In a briefing to the standing committee, Langrial stated that the prime minister approved funds under a transformation plan to strengthen the FBR, which will improve efficiency.

On Tuesday, the Economic Coordination Committee of the Cabinet approved a Rs32.5 billion package for the FBR. Of this amount, Rs5.6 billion was designated for the purchase of 1,087 new 1,300cc vehicles. About Rs19.7 billion will fund anti-smuggling initiatives, with Rs14.4 billion repurposed from the budget.

The ECC also approved Rs2.5 billion for up to four extra salaries, and another Rs3.4 billion to boost FBR's operational capacity. Additional salaries will likely be given to all FBR employees, with one car offered to every grade-17 and grade-18 officer to motivate them toward achieving this year's Rs12.97 trillion tax target.

The committee also reviewed the Rs1 per invoice fee that the FBR charges shoppers at Point-of-Sale (POS) integrated shops. The meeting revealed that since July 2023, the FBR collected Rs647 million from the POS services fee, of which Rs309 million was allocated to employee welfare.

Senator Mohsin Aziz inquired about the amount collected through the Rs1 fee on each POS-related invoice and its utilisation.

The total POS fee collected was Rs647.4 million, with Rs309.4 million primarily used for employee welfare. FBR Member Operations Hamid Atiq Sarwar stated that the government had introduced a prize scheme for POS users, but it was discontinued due to fraudulent complaints.

The FBR chairman said that a new scheme in Islamabad, where shoppers receive up to Rs20,000 for reporting fake POS receipts to the FBR. He added that the FBR has the authority to impose fines up to Rs500,000 and seal shops for failing to disclose true sales and incomes. Langrial shared a personal experience, noting that he visited United Bakery in Islamabad, which only accepted cash payments. The FBR sealed the bakery for not accepting credit or debit cards, he said.