IMF loan should bracket fiscal reforms, increased tax collection

Tariq Khattak

increased tax collection
increased tax collection

Tuesday, July 23, 2013 – Islamabad—Going for IMF monitory support is not a bad move if it leads to fiscal reforms, increased tax collection and documentation of economy, said speakers while discussing at a seminar here on Monday.

However, experts also demanded government to presents its plan of action to ensure implementation of reforms, particularly the strengthening of tax machinery, expansion of tax base, reduction in indirect taxes and reforms in public sector enterprises.

They were discussing at a seminar organized by Sustainable Development Policy Institute (SDPI) on “Pakistan Federal Budget 2013-14 and Role of IMF”.

Speaking at the occasion, economist and financial expert, Safiya Aftab, said that government cannot achieve revenue targets, until radical reforms and restructuring is done in current tax administration.

“Current budget disregards the dismal performance of tax authorities who collected Rs. 2 trillion against the target of Rs. 2.7 trillion last year. This year budget estimates Rs 3 trillion revenue collection, but no policy framework has been provided on how to achieve target of additional 1 trillion rupees from last year. This is precisely why IMF in recent negotiations, was not convinced that tax administration was amenable to reform”, she added.

Safia Aftab added that current budget didn’t reflected on any major change in policy direction from previous budgets. “The budget moves to higher tax rate to achieve revenue targets but no move was made to document economy through VAT. As a result, the bulk of sales tax burden falls on the end consumer,” she added. She also commented widespread tax avoidance in Pakistan and cited figures that only 1.2 million Pakistanis file income tax returns whereas the actual tax payers are even less than that figure.

Analyst and media personality, Farrukh Pittafi, said that over the years in Pakistan, IMF program was unnecessarily criticised which ended up in a situation where governments, especially the political governments were unable to own them. He asked government, media and civil society to explain true narrative to ordinary people to brings economic reforms in the country.

However, he also apprehended the role of IMF in past. He said that IMF track record not only reflects the political decision making linking it to foreign policy, but it also tends to conveniently overlook its own reform agenda in areas such as defence spendings or taxing the sectors with powerful lobbies such as agriculture.

Dr Abid Qaiyum Suleri, Executive Director, SDPI said that the new IMF program came with ‘front loading package as Pakistan failed to implement previous commitments with IMF. “It means that Pakistan has to take fiscal and structural reforms measure before the start of loan negotiations, and this reflected in current budget, “he added. Courtesy Pakistan Observer

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