Pakistan agrees to slap billions in new taxes

Published: November 6, 2015


PHOTO: AFP/FILE Government will announce Rs40 billion in additional tax measures to bridge shortfall in revenue targets, says official. PHOTO: REUTERS

In order to secure the next $502 million loan tranche from the International Monetary Fund (IMF), Pakistan has agreed to slap roughly Rs40 billion in additional taxes to bridge the shortfall in its revenue targets.

In return, the IMF agreed to give Pakistan two waivers after it failed to deliver on two key conditions — the quarterly target of restricting the budget deficit to Rs306 billion and reduction in Net Domestic Assets (NDA). With the fresh waivers, the lender has so far given Islamabad 14 waivers in the nine reviews of Pakistan’s economy, highlighting its lenient policy towards implementation of structural reforms.

Inconclusive IMF talks extended for two days

“The [IMF] mission and Pakistani authorities have reached a staff level agreement on the completion of the ninth review under the Extended Fund Facility (EFF) arrangement,” IMF’s Washington-based mission chief for Pakistan, Harald Finger, announced at a news conference alongside Finance Minister Ishaq Dar in Islamabad on Thursday.

He said the staff level agreement was subject to the approval of the IMF board, which, according to Dar, is expected to meet on December 15.

The three-year $6.2 billion EFF programme is built on five key conditions, known as quantitative performance criteria, and many structural benchmarks.

IMF to weigh in as Pakistan mulls single-stage sales tax

Pakistan met three of the five targets for the July-September period. These, according to Finger, are quantitative performance criteria on the net international reserves of the State Bank of Pakistan, reduction in government borrowings from the SBP and foreign currency swaps.

However, conditions for net domestic assets (NDA) and budget deficit targets were missed, said Finger.

In a clear hint to new tax measures, a written statement by the IMF notes that “the [IMF] mission welcomes [Pakistani] authorities’ plans to take action to attain the budget deficit and tax revenue targets for fiscal year 2015-16.” The statement underlined the need for “accelerating steps to widen the tax net.”

SBP reserves down to $14.821 billion

Speaking at the news conference, Finance Minister Dar said the Federal Board of Revenue missed its quarterly tax target by Rs40 billion, which in turn meant the quarterly fiscal deficit target was missed by Rs23 billion. However, he added that the government managed the remaining gap by “prudent management of expenditures.”

When asked about new tax measures, Dar said the government will see the results of collection in November and, if needed, would withdraw tax concessions which the government plans to phase out in the next fiscal year this year.

However, an official privy to discussions told The Express Tribune that additional tax measures to generate Rs40 billion may be announced next month. He added that the new tax measures were a certainty with only their timing as yet undecided.

Accused of fudging data to trick IMF

Sources said Dar also took Prime Minister Nawaz Sharif into confidence before conveying Pakistan’s willingness to the IMF to introduce a mini-budget to slap the new taxes.

The government has given Rs3.104 trillion tax target to the FBR and has already increased general sales tax rates to an unprecedented level to support declining revenue collection.

Dar also sought the premier’s permission to extend the ordinance issued to lower the withholding tax rate on banking transactions to 0.3% under an arrangement with the traders. Dar said the National Assembly will today (Friday) extend the ordinance for another four months through a resolution. The ordinance is set to lapse on November 7.

IMF praises SBP for financial sector’s stability

Meanwhile, Finger said that the IMF has retained its projection of 4.5% economic growth rate for this year against the official target of 5.5%. He said that the slowdown in private sector credit and negative growth in trade were the downside risks to the growth.

The IMF lowered its inflation projection from 4.7% to 3.7% for this year.

The IMF also asked Pakistan to further strengthen foreign currency reserve buffers to absorb external shocks.

Published in The Express Tribune, November 6th, 2015.

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Reader Comments (29)

  • Sodomite
    Nov 6, 2015 - 8:41AM

    When IMF gives waivers it represents failure of both Pakistan and IMF to first stipulate a covenant that was too ambitious to meet or a misreading of Pakistan’s economic IMF gurus to meet such targets. The economy is still in doldrums, still not generating sufficient investment that can generate self-sustaining growth. It still has not sorted out power outage and outages in gas and water key elements in running a business. Recommend

  • worried citizen
    Nov 6, 2015 - 9:20AM

    This tax burden will only come on those who are already paying their taxes regularly. People sitting in senate, will never pay their actual taxes. Further, our beloved PM will keep spending millions of dollars in their foreign visits along with his whole family and we will keep voting them so that they can rule us and make stupid policies.Recommend

  • Raisani
    Nov 6, 2015 - 10:26AM

    @worried citizen
    You are very right the rulers and elite won’t pay taxes rather they will profligate on our taxes money like if it would be their father’s fiefdom.
    -Worried as well as disappointed citizens. Recommend

  • Omar Sadiq
    Nov 6, 2015 - 11:01AM

    First start imposing taxes on;
    1. Politicians
    2. Agriculture Income
    3. Waderas
    4. Industrialists
    THEN come after the masses with new taxes.
    The day is not far when the people have to come out on the streets (without being under any political banner) and teach a lesson to a few policemen, ministers and their advisors, then only will these elite people in power will become insan-ka-bacha.Recommend

  • Jahan
    Nov 6, 2015 - 11:11AM

    Fruits of PMLN. Thanks rigging and those voters who took part it in now suffer ;)Recommend

  • Disgusting
    Nov 6, 2015 - 11:16AM

    So this is the economic progress that is much touted by Nawaz Sharif and Ishaq Dar. We will pay but Nawaz and Co will benefit and use this money!!! Swindling at its best.Recommend

  • Sad
    Nov 6, 2015 - 12:26PM

    Those already paying taxes will be put under an even greater burden, while no effort will be made to bring non tax-payers into the tax net (as mentioned above: politicians, vaderas, etc.). Plus it hurts to pay when you see your PM (and other useless positions like the President) make lavish, expensive trips — funded by your hard-earned money!!!!!!!Recommend

  • Sheraz Khalid
    Nov 6, 2015 - 12:32PM


  • Feroz
    Nov 6, 2015 - 12:43PM

    Great, collection of Taxes and plugging of leakages with enforcement is the key.Recommend

  • Over burdened citizen
    Nov 6, 2015 - 1:19PM

    Dear Mr. Dar and Mr. PM
    Please do the following:
    1. Stop spending tax payers’ money on your own and other party members’ luxuries like protocols and foreign trips.
    2. Start paying taxes yourself.
    3. Stop embarking upon useless projects just to benefit your acquaintances and business associates.
    4. Try to curb the corruption that is rampant in all govt. departments and punish the ministers/MNAs and all govt. officials involved in corruption.
    5. Bring all the money invested by you abroad or lying in your foreign bank accounts to Pakistan and Invest it in the country which is being ruled by you.Recommend

  • Mohammed Wani
    Nov 6, 2015 - 2:03PM

    The Prime Minister wants to go to UN & US and stay in better hotels with 74 people, and wants to highlight the “Human Rights ” issue in Kashmir and meanwhile The suspension of GSP Plus status of Pakistan cannot be ruled out if the South Asian nation fails to comply with 27 conventions of the United Nations, particularly those that are related to human rights, said the European Union ambassador to Pakistan.This is comedy.Recommend

  • Layman
    Nov 6, 2015 - 3:06PM

    Tax, Tax, Tax only on poor and middle class, Never seen such an incompetent government in my whole life the so called experience lot has governed Pakistan so badly that cracks are opening wide in our economy, there are just filling them with artificial gimmicks..Recommend

  • Adnoon Siddiqui
    Nov 6, 2015 - 3:22PM

    Thank you Mian Sahab, we are prepared to empty our bank accounts so you and your family can expand your business empireRecommend

  • Irfan
    Nov 6, 2015 - 3:28PM

    More tax burden on the salaried and poor people soon….after the bank transaction tax

    Where are all the PML-N supporters now ?. I do not see a single comment from PML-N supporters on this article.Recommend

  • Pacer
    Nov 6, 2015 - 5:45PM

    Yay.. more loans means more metro buses/trains. More shiny and more glamorous than previous onespRecommend

  • adnans hair
    Nov 6, 2015 - 5:54PM

    PMLN supporters are debating if they can blame this on the dharna or not! lolRecommend

  • WozAhmed
    Nov 6, 2015 - 6:07PM

    Everything will be OK , we are going to add 100 million citizens to our nation in next 35 years, 300,000 of them will pay direct tax and save us.

    People need to realise we pay tax and a chunk goes to debt, military a fraction goes to corruption, in fact more is probably wasted due to incompetence.

    We handicap ourselves by trying to be a political player, Saudi against Iran, anyone against India. People need roti, Kapara aur makaan.

    I don’t see anything but an aid driven economy , CSf, gsp plus as examples.

    Our people deserve better !Recommend

  • bahaha
    Nov 6, 2015 - 6:07PM

    Pakistan can easily “raise/meet” 40 billion revenue. JUST CLOSE “GHOST” GOVT OFFICES.

    Just for Kicks make a list and functions of offices and then visit them to see how “busy”.Recommend

    Nov 6, 2015 - 6:19PM

    i think Pakistan should adopt the zero based budgeting system and then a few WORLD BANK consultants to advise the govt how to collect the taxes of all sorts from the retail section of the economy,from the public and the private transport systems as well the industrial units.Divide each city of Pakistan into various zones and employ tax police who would access and collect taxes from the traders and the industrial units in that particular zone,such an act forcefully planned applied and consistently carried out should open flood gates in trillions of tax rupees and that is one of the effective ways of gaping the budget deficit and people who have stashed money in the foreign banks and lands must realize whatever you have overseas that is fine but for the sake of humanity stop now and go to the first principle of ISLAM,don’t be greedy,stingy and pay your taxes honestly your children and all the generations of them to come will benefit,this is your land billions overseas is not helping any one,after all how much do you need to fill up your stomach. before you go to bed.Recommend

  • Sultan Durrani
    Nov 6, 2015 - 6:25PM

    Another broad day light robbery in offing. Middle class people will be crushed. No body is there in the country to stop this massacre of innocent Pakistanis.Recommend

  • M Hassan
    Nov 6, 2015 - 6:28PM

    @Irfan: Supporters are feeding the PML SHARRecommend

  • Skywalker
    Nov 7, 2015 - 2:14AM

    As a nation we have to take this burden for a short time, after we get Kashmir all taxes will be eliminated. So, please let us put as much effort as possible in opening our wallets, pay taxes so that Army becomes strong and brings down India.Recommend

  • numbersnumbers
    Nov 7, 2015 - 7:11AM

    However, any new taxes will only fall on the Pakistani little people since those wealthy Pakistani Elites and Feudals make sure their puppet MNAs never tax them!Recommend

  • Ahmed
    Nov 7, 2015 - 9:05AM

    PML has failed to collect taxes from traders and now these new taxes will be borne by blue collar salaried class… againRecommend

  • H.A.Khan
    Nov 7, 2015 - 9:49AM

    What is needed is urgent reforms in FBR.
    This will lead to resolving a lot of tax related issues including arresting low tax collection and very low number of taxpayers.
    The present top team of FBR has very badly failed and needs to be changed and tax reforms introducedRecommend

  • Jack Dawson
    Nov 7, 2015 - 11:18AM

    As far as I have seen all goverments in Pakistan put tax on business class people who are already tax payer,although not paying fully but at least paying somting to the kitty, but Govt. never impose taxes on agricultural income in letter and sprit and always says that agricultural income is provincial subject but WHY??? If agricultural income in provincial subject than a certain business also belong to a certain province so it is also a provincial subject and all problem lies here.

    Pakistan ia an agricultural country with 80% of population is in agriculture but as the rulimg class is also involved in agriculture so they never let govt to put taxes on them.

    If govt. In Pakistan will be pushing so hard to common man there will be a day when common man will say NO MORE TAX paymentsRecommend

  • Pakistani
    Nov 7, 2015 - 1:41PM

    Whats wrong with the government?? Why do they seeks funds from IMF when they knowned to destroy country economies! Anyone know what they did with Latin America Good job PML-N supporters for destroying the country and putting debt my children’s children!!!Recommend

  • jk
    Nov 8, 2015 - 11:20AM

    Good job… people of pakistan are liable to pay because they have elected their loyal, sincere leadership.. bravo.Recommend

  • iLaugh@U
    Nov 9, 2015 - 8:39AM

    It’s so impossible to believe, can someone help me out here please? If we can Tax the people and collect billions why we are not using that money that we collect to, instead of getting a loan from IMF to pay with interest in millions?Recommend

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