Tax reforms: Pakistan calls on UK to help revamp tax machinery

As part of the new IMF bailout package, Pakistan needs to expand the tax net and boost revenue collection.

Shahbaz Rana July 10, 2013
Federal Board of Revenue is facing a gigantic task of increasing tax collection to Rs2.475 trillion, requiring a growth rate of 28%. CREATIVE COMMONS


Pakistan has sought the assistance of the United Kingdom’s Royal Custom Service to expand the country’s extremely narrow tax base as Islamabad embarks upon an ambitious plan of increasing collection by 28% and bringing at least 100,000 top tax dodgers into the net this year. 

The request was made by the Finance Minister Ishaq Dar during a meeting with the UK Secretary of State for International Development Justine Greening. He said Pakistan will be interested to learn from the experience and expertise of Her Majesty’s Revenue and Customs (HMRC).

Greening said the Department for International Development (DFID) of the UK will look forward to work with the government of Pakistan. She said that Pakistan will be one of the first countries with which the HMRC will share its expertise for expanding the tax net.

Federal Board of Revenue, which is plagued by corruption and had become dysfunctional over the years, is facing a gigantic task increasing tax collection to Rs2.475 trillion, requiring a growth rate of 28%. As part of the recent bailout package condition agreed with the International Monetary Fund (IMF), the government is also required to bring 100,000 top tax dodgers in the tax net by June 2014.

Greening said that the initial steps taken by the Pakistani government were “impressive, setting the right momentum and the tone”, but cautioned that while the planning was extremely critical, delivery is what is even more difficult.

Greening assured Dar that DFID will work closely with the government of Pakistan to overcome the economic challenges faced by the government.

The finance minister said Pakistan has set an ambitious revenue target which will be achieved through good governance, broadening the tax net, brining in 100,000 new tax payers this year, plugging leakages and posting of officials in the revenue department who are competent and have good reputation.

He said that the increase in general sales tax to 17%, granting the FBR connectivity to the banks and levying half a percent tax on immovable assets valued over Rs1 million are some of the measures taken by the government to enhance revenues and achieve the revenue target.

He said the government took various measures in the budget to expand the social safety net, which includes increase in allocation to the Income Support Programme from Rs40 billion to Rs70 billion, expansion of education to students belonging to the three Southern Divisions of Punjab, Malakand, Kohistan, and Dera Ismail Khan in Khyber-Pakhtunkhwa and interior Sindh.

Dilating on the energy situation, the finance minister said that the government has already cleared part of the circular debt owed to the private power companies which will help in optimal utilisation of their capacity. The prime minister, he said, will soon announce an energy policy which envisages power project based on cheaper fuel.

Published in The Express Tribune, July 11th, 2013.

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