IMF narrows focus on new tax measures
IMF urges Pakistani authorities to listen to its experts instead of relying on the arguments about ground realities.
ISLAMABAD:
The International Monetary Fund has narrowed down its focus in the new budget to mainly on additional tax measures and rebalancing the National Finance Commission award, as the government badly struggles finding any space to provide relief to the salaried class and the real estate sector.
The IMF on Thursday urged the Pakistani authorities to listen to its experts instead of relying on the arguments about ground realities or the Laffer Curve tax theory, the sources said. The Pakistani authorities mentioned low revenues due to high tax rates, which the IMF did not appreciate, they added.
During a separate session, the IMF also raised questions on the working of the Federal Board of Revenue to cut taxes for the salaried class, said the government sources. They added the IMF was of the view that the proposed reduction in rates for the salaried class may result in far higher relief than claimed by the government. The FBR was now in the process of redoing the salaried class taxation slabs.
The sources said that during the kick-off meeting with Finance Minister Muhammad Aurangzeb on Thursday for the budget approval, the IMF’s outgoing mission Chief Nathan Porter narrowed down his mission’s focus to four areas.
The topmost priority of the IMF would be the revenue measures to back the Rs14.307 trillion tax target and rebalancing the distribution of fiscal resources under the NFC without affecting the constitutional scheme. The sources said that the other two areas of interest during the talks will be any savings from the downsizing of the government and the privatisation agenda in the next fiscal year. ]
The provinces get 57.5% shares in the federal taxes and the government was trying to hold back some of the sums without amending the Constitution. During a meeting last week, a cabinet minister had recommended getting 50% of the additional defense spending from the provinces due to increasing requirements after India’s naked hostilities against Pakistan.
During a taxation related meeting with the FBR, the authorities shared the proposal of reducing taxes for the salaried class. The sources said that the government proposed increasing the income tax exemption threshold from Rs600,000 to Rs1.2 million per annum.
