Amidst the visit of the International Monetary Fund (IMF) technical team to Pakistan, crucial discussions and meetings are taking place, signaling the initiation of preparations for a policy document based on recommendations for a potential new program for the country.
According to sources, the delegation has engaged in discussions not only with key government officials but also visited the Ministry of Finance and Ministry of Commerce.
Sources further revealed that the international lender’s team held discussions with the task force established to formulate recommendations centered on reforms. The current visit involves a comprehensive review of the 2019 policy document, taking into account the present economic situation.
It is noteworthy that in 2019, the IMF collaborated with Pakistan to formulate a policy paper based on recommendations for a loan program. This program encompassed various elements, including the imposition of federal excise duty and additional taxes on beverages within the tobacco sector.
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Additionally, the agenda included proposals for an increase in the personal income tax rate and the removal of unnecessary exemptions from the Goods and Services Tax (GST). Finance Ministry officials also highlighted that other stipulations, such as a petroleum development levy, were integral to the program.
The Ministry of Finance confirmed that the IMF had previously provided a loan program to Pakistan. As the technical team continues its visit, the collaborative efforts between the IMF and Pakistani authorities aim to assess and address the economic landscape, paving the way for potential policy adjustments and financial support.
Earlier, the Federal Board of Revenue (FBR) officials said that during the weeklong consultations, the delegation will provide assistance on increasing tax efficiency.
The Fund has insisted on raising the tax-to-GDP ratio to 15%. The IMF has also demanded to bring the rich into the tax net.
The consultations are also likely to feature a discussion on the mechanism to bring retailers into the tax net. The global lender will provide policy guidelines for the proposed scheme.
The target is to bring 1-1.5 million people into the tax net by June 2024, while the number of taxpayers will be taken up to 6.5 million by then. Moreover, third party data and technology will be used to expand the tax net, the officials said.
Previously, it had been reported that any amendments proposed to the tax policy as a result of the negotiations will be implemented from the new budget.
Sources had said around a week ago that negotiations to improve the tax policy and its implementation will continue for a week after the arrival of the IMF technical delegation to Pakistan next week. They further said that the delegation will review measures to increase tax revenue, and hold policy discussions with the FBR.
During the discussions, measures for amendments to the tax policy will also be reviewed. The purpose of the amendments is to increase the tax net and collect more revenue, the sources added.
The basic infrastructure of a scheme for retailers will also be developed, according to the sources. The target is to bring in a million people into the tax net and increase it to six million. The proposed amendments to the tax policy will come into effect from the next budget, the sources added.
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