Islamabad: The International Monetary Fund (IMF) has asked Pakistan for taking further taxation measures to increase the revenue collection on short term basis in order to stabilise its economy.
The IMF’s Resident Chief in Pakistan Teresa Daban Sanchez said in her comments on the recent finance supplementary (second amendment) bill tabled by the PTI-led government before the parliament that the IMF was still evaluating the reform package. “Our understanding is that it includes a set of tax, administrative and regulatory measures aimed at lifting distortions that could foster private sector activities. Further measures are needed to increase revenue collection in the short term to support efforts to stabilise the economy,” she said.
On the other hand, the Federal Board of Revenue (FBR) has estimated revenue loss of Rs6.8 billion because of the relief measures taken by the government through the new bill at a time when the tax collection machinery had already faced revenue shortfall of Rs158 billion in the first half (July-Dec) period of the current fiscal year.
The government did not bring any change in annual tax collection target of Rs4,398 billion for the current fiscal year 2018-19. A top official of the FBR told The News in background discussions that the tax collection was gearing up in the second half of the current fiscal year as the tax team took a number of administrative steps to streamline the revenue collection in the second half of the ongoing financial year.
The FBR undertook crackdown against high net worth individuals on the basis of certain parameters for owning property of over Rs20 million, possession of vehicle above 1800cc and having annual rental income of Rs10 million. So far, the FBR has sent 3,121 notices to high net worth individuals in four phases out of which it has received 154 tax returns with tax collection of Rs21.1 million. The FBR official said the database with the help of other agencies was being developed to identify high net worth individuals on the basis of consumption pattern to determine whether they were living luxurious life after which more tax notices would be served.
The FBR’s tax collection has so far fetched Rs1,894 billion in the first six months of the current fiscal year against the desired target of Rs2,052 billion for this period. Now the FBR will have to collect Rs2,504 billion in the second half (January-June) period to display the desired tax collection target on June 30, 2019.
With the envisaged budget deficit target of 5.1 percent of the GDP, the FBR will have to gear up its efforts to achieve the desired tax collection target despite the fact that expenditures will balloon in the wake of pressing requirements of increased burden of debt servicing in the wake of devaluation of rupee against dollar.
How the government is going to achieve the desired budget deficit target is yet to
be seen but so far it is highly unlikely to restrict the budget deficit at the desired level of 5.1 percent of GDP, keeping in view the shortfall in tax and non-tax revenues and ballooning of expenditures side.
“The government is left with no other option but to jack up the budget deficit target from 5.1 percent to 5.6 percent of GDP for the ongoing fiscal year,” said the sources, and added that it might go up over 6 percent of GDP by end June 30, 2019.