IMF demands Pakistan to reduce expenditures or collect Rs189bn tax

The International Monetary Fund (IMF) has urged Pakistan to enhance revenue, either by imposing a tightened control on expenditures or introducing a min-budget with additional taxes. 

The demand comes as tax machinery’s failure in collecting tax unfolded before the mission, which is currently in Islamabad for high-level talks about lending plans.

Islamabad’s and IMF representatives gathered in Islamabad on Monday, where the Chairman Federal Board of Revenue, Rasheed Mehmood Langarial and Secretary of Finance Division, Imdad Ullah Bosal, informed the lenders that they could not fulfil the tax expectations under the Tajir Dost Scheme(TDS). 

The authorities have collected only Rs1.7 million tax with TDS against the estimated Rs10 billion in the first quarter. However, less tax collection could prompted the fund to impose more harsh conditions before releasing a second tranche of the $7 billion bailout programme. 

Currently, global loan lenders asked authorities to bridge the tax shortfall by collecting Rs189 billion tax via a mini-budget or imposing an effective austerity scheme to control expenses in several public departments.

On condition of being anonymous, an official said that the TDS aimed to bring all wholesalers and retailers into the tax net, but the FBR collected Rs11 billion additional tax from normal taxation, as several traders refused to register themselves.

Under Sections 236-G and 236-H of the Income Tax Act, the FBR increased the tax rate on sales of products to non-filers by almost 10 times and due to these strict measures, the retailers and wholesalers joining the tax net and prioritized deposited Rs11 billion as additional tax by September 30, 2024, to avoid further increase. 

However, the global loan lenders will stay in Islamabad from November 11 to 15 to discuss the future finance plan. During this visit, the delegation will also review the policies of the country that have been made to pull it from the cash-strapped.