The ruling coalition on Tuesday said there are no plans to impose additional taxes to meet reported demands of the International Monetary Fund (IMF) over revenue shortfall, adding the Federal Board of Revenue (FBR) was aiming to make up the difference through administrative measures related to smuggling and under-valuations.
Briefing the National Assembly’s Standing Committee on Finance and Revenue, FBR Chairman Asim Ahmed said domestic tax collection in the ongoing fiscal year had been as expected, but overall collections had suffered due to a restriction on imports. Noting that the loss of import taxes had been covered by domestic taxes in the first quarter, he warned that going forward domestic taxes would also suffer because of foreign compression.
To a question on reports of the IMF demanding additional revenue measures and the government considering the imposition of new taxes, the FBR chief said there were no plans to impose any new taxes. However, he did not confirm or deny the IMF’s demands. He said the FBR was on track for revenue collection thus far, adding that any impact of a lower GDP or mounting inflation would be examined if it became a persistent factor. Noting that the IMF had expressed satisfaction over tax revenues last month, he warned that political and economic instability might trigger a drop in revenues in the coming months.
According to the FBR, it has collected Rs. 2.149 trillion between July and October 2022, achieving its income tax target, but failing to meet its sales tax and customs duty targets. Ahmed said the rate of direct taxes in the total tax revenue was 62 percent, adding Rs. 52 billion had been collected in the last fiscal year through income tax returns. He said tax-to-GDP rate is currently at 9 percent, noting it had been decreased due to the rebasing of GDP.
Impact of floods
In her briefing, State Minister for Finance Aisha Ghaus Pasha said that nine million people had fallen below the poverty line due to this year’s floods, adding that economic growth rate might also fail to achieve its target by over 2 percent. She said the Pakistani delegation had conducted 54 meetings with the IMF, the World Bank, and other officials in a recent visit to America, adding the global lenders had been briefed on revenue generation as well the impact of this year’s floods.
Noting that the IMF Board was likely to grant some concessions in loans to Pakistan, she said detailed discussions over this issue would be held at the end of November. Reiterating that the Ministry of Planning had estimated $30 billion in losses due to floods, she said the government had already spent Rs. 120 billion in providing cash handouts to flood-affected people. Thus far, she said, commitments were in place for Pakistan to receive a $500 million grant from the World Bank and a $1.5 billion loan from the Asian Development Bank (ADB).
The U.N., she said, was also playing its role in helping Pakistan receive compensation for climate change-induced damage.
Pasha admitted the government had undertaken a series of structural adjustments rapidly, but stressed that the weaknesses in the national economy had developed over several years. “Pakistan would have to make further structural changes to stabilize the economy,” she warned.