ISLAMABAD - Pakistan’s economic team is likely to face tough time from International Monetary Fund (IMF) in Dubai next week over the poor performance of Federal Board of Revenue (FBR) that had failed to achieve the tax collection target and broadening of tax base in last fiscal year.
As the talks with the IMF going to start next week in Dubai, sources in Finance Ministry informed that Pakistan might face tough time in negotiations over the poor performance of the FBR. The tax department had failed to broaden the tax base of the country by bringing wealthy and rice non-taxpayers into tax net and missing of revenue collection target during previous fiscal year despite revising its several times.
Talks between Pakistan and IMF would start from August 6 2014 in Dubai for the fourth economic review of the country under extended fund facility (EFF) programme. “The talks between Pakistan and IMF would be held from 6th to 15th August”, said Rana Asad Amin adviser and spokesperson of the Finance Ministry. This would be the fourth review of the Pakistan’s economy under the September 4, 2013 approved $6.64 billion Extended Fund Facility (EFF).
Sources informed that government had performed well in other sectors, as it restricted budget deficit at around 5.7 percent of the GDP, privatise two public sector entities United Bank Limited and Pakistan Petroleum Limited, provided financial assistance to the poor under Benazir Income Support Programme during last fiscal year 2013-14. However, FBR’s performance remained unsatisfactory. The FBR’s plan to bring wealthy non-taxpayers into tax net did not yield desire results. After serving two notices required under the income tax law, the FBR has generated tax demand of Rs11 billion out of which the collection so far remains very low. The FBR has collected just Rs306 million out of this initiative clearly indicating that the IMF’s condition to broaden the tax base has miserably failed to yield any substantial result. The incumbent government had devised a plan to bring 100,000 wealthy non-taxpayers into tax net every year in next five years in a bid to broaden the tax base of the country. However, the government had failed to produce encouraging result from the broadening of tax base, as only 17,314 people have filed their income tax returns out of total notices issued, 1,20,350, during last fiscal year 2013-14. Meanwhile, more than 38,000 second notices (under section 122C) which are to be followed by provisional assessment, collection procedures and penal and prosecution proceedings.  Similarly, the government would also face music on missing tax collection target despite revising it several times. The FBR had fixed its target at Rs2475 billion in last fiscal year, which was revised downward to Rs2345 billion and again to Rs2275 billion. However, the tax department even failed to achieve its revised target by the end of June 2014 despite taking additional taxation measures. The FBR collected Rs 2266 billion during previous fiscal year 2013-14 against the twice-revised tax collection target of Rs 2275 billion, leaving shortfall at Rs9 billion.
“Pakistan will receive fifth tranche worth of $550 million in September if IMF satisfy with the economic performance of the country”, said another official of the Finance Ministry. Pakistan had already received four tranches worth of $2.2 billion from the Fund during previous financial year 2013-14 that helped the country to repay its previous loans.
Finance Minister Ishaq Dar is likely to head the policy-level discussions with an IMF team led by Jeffrey Franks from August 11. Technical-level discussions would begin from August 6. Officials of budget wing Finance Ministry, State Bank of Pakistan as well as officials of Federal Board of Revenue (FBR) and Ministry of Water and Power would take part in technical-level discussions.
Meanwhile, the International Monetary Fund (IMF) mission scheduled for early August will follow up on the latest developments with data dissemination, said Gerry Rice Director Communications Department IMF. Briefing media persons in Washington last days, Gerry Rice said: “The IMF has been providing technical assistance to Pakistan on improving national account statistics with significant progress observed over the course of the last year. The upcoming mission, which is scheduled for early August, will follow up on latest developments with data dissemination,” he added.