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Print Print 2022-02-16

IMF ‘wishlist’ cannot be implemented in totality: Shaukat Tarin

  • We negotiated hard with the IMF in the past and it would be done again, says finance minister
Published February 16, 2022

ISLAMABAD: Finance Minister Shaukat Tarin Tuesday said the government would hold negotiations with the International Monetary Fund (IMF) on reforms in the Personal Income Tax (PIT), withdrawal of exemptions under the PIT and bringing changes in the existing income tax slabs is the “wishlist” of the fund.

He was responding to a query on the status of the IMF structural benchmark of preparation of draft PIT legislation by end-February 2022 on the conclusion of second Computerized Draw on POS Prize Scheme held at the FBR Headquarters, here on Tuesday.

“We negotiated hard with the IMF in the past and it would be done again as the wishlist cannot be implemented in totality,” the finance minister said.

The Personal Income Tax (PIT) is the wishlist of the IMF. We will negotiate the PIT with the fund: Finance Minister Shaukat Tarin

Tarin responded, “What do you think that whatever the IMF demands, we agree to all their demands? Things are not like that. Did I agree to all earlier demands of the IMF? We have to sit with the fund and hold discussions on each issue with them. The Personal Income Tax (PIT) is the wishlist of the IMF. We will negotiate the PIT with the fund. We will inform the IMF that the revenues are increasing and overall revenue position is stronger. The government will hold negotiations with the IMF on the PIT. The government will not withdraw all things under the PIT without further negotiations with the IMF,” he added.

Critical next steps for ongoing reforms: IMF rearranges structural benchmarks

During the ceremony, Rs53 million prizes were distributed among 1,007 winners through balloting on QR Code Receipt generated through Point of Sale (POS) here at the FBR headquarters on Tuesday.

To another query about increases in POL prices, he replied that the prices have been revised upward keeping in view international prices, last time we have not increased prices of the POL products.

Addressing the gathering, Tarin said that Pakistan could not achieve inclusive and long-term growth with the existing low level of tax-to-GDP ratio standing at 10 percent.

“Pakistan has failed to achieve long-term sustained growth mainly because of three major reasons including low savings rate, the yawning gap between exports and imports, and low agriculture productivity,” he said. In order to achieve over six percent growth, the government would have to substantially raise the tax-to-GDP ratio up to 20 percent.

China’s tax-to-GDP ratio stands at 40 percent, while Turkey and Thailand also achieved higher tax-to-GDP ratio, so Pakistan would have to overcome its “fault lines” to improve its taxation, he said. He warned that the government would take action against those who deducted general sales tax (GST) from customers but pocketed the deducted amount. Although, he did not want any kind of harassment but appealed to all the retailers to deposit the deducted amount into the national kitty, he maintained.

He regretted that out of 220 million population, there were only three million return filers and one million filed returns just for the purpose of avoiding charging of full withholding taxes. Thus, there are only two million taxpayers. He said that Germany’s finance minister told him that there was no representation without taxation but Pakistan’s culture was quite different. Pakistan’s tax base was quite low and the country was lagging behind as there should be only two major taxes including Income Tax and second consumption tax known as GST. “There is no short cut and there is a need to do away with other taxes such as in the shape of different withholding taxes,” he added.

Talking about the GST, he said that the GST should be imposed as Value Added Tax (VAT) where the supply chain starting from manufacturers, wholesaler and retailers should be brought in the tax net. Finally, the tax is charged from customer on the basis of consumption but he admitted that the supply chain is broken halfway. The retailers do not pay the taxes fully, he added.

Now the FBR, he said, integrated tier-1 retailers with POS machines and all customers must get integrated genuine receipts from them.

The total sale of retailers stood at Rs20 trillion out of which the captured sale was just 20 percent or Rs3 to 4 trillion only and the country’s tax-to-GDP ratio was just hovering around 10 percent. The country’s current expenditures stood at 12 to 14 percent of the GDP, so the tax revenues cannot fulfill even expenditures requirements. With the help of non-tax revenues, he said that the country could meet just its current expenditures and the country cannot achieve its development objectives in such a prevailing situation, he said. The country’s growth target of six to eight percent on an annual basis cannot be achieved with low tax-to-GDP ratio, he said and added that the tax-to-GDP ratio would have to be doubled from existing 10 percent to 20 percent.

He said that the FBR was going to cross Rs6 trillion mark during the current fiscal year but the size of the economy also stood at Rs60 trillion.

FBR Chairman Dr Muhammad Ashfaq said on the occasion that the number of POS generated valid receipts had gone up to 153,000 in January 2022 against 43,000 in December 2021. Mohammad Aslam from Karachi won the bumper prize of Rs1 million, while two individuals won Rs500,000 prize through balloting. One thousand customers won prizes of Rs50,000. Four customers won prizes of Rs250,000 each.

Copyright Business Recorder, 2022

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