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February 20, 2019
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IMF Asks Govt to Levy More Taxes for Raising Tax Revenue

ISLAMABAD: The International Monetary Fund (IMF) has attached new strings with the bail-out package Pakistan is seeking from the Fund to stave off a possible balance of payment crisis.

Media reports said that the bail-out talks the government is going to held for securing a financial package from the IMF are going to be tough.

Dawn while quoting unnamed government officials reported that the Fund has asked for Rs160 billion worth of new tax measures in the current fiscal year in order to stabilise the fiscal framework.

The Federal Board of Revenue (FBR) calculates that the 1.1per cent increase alone means Rs400-500bn additional tax revenue measures. If undertaken, the steps will lift the country’s tax-to-GDP ratio to 13.9pc by end June 2021. The government has set a fiscal deficit target of 5.6pc for 2018-19 whereas the IMF’s projection is slightly below this.

As per the report the IMF is laying out specific revenue targets for each year of the proposed programme and is asking the government to commit to raising the tax-to-GDP ratio by 0.4pc of GDP by June 2019, followed by 1.1pc in FY20 and 1.2pc in FY21.

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In addition to these revenue measures, the Fund has also asked for increases in provincial revenues, from current 1.1pc of GDP to 1.5pc by end of the programme. This means that provinces will also have to introduce new revenue streams.

According to earlier reports, the tax machinery has alreadyasked the finance ministry to approach the Supreme Court to find a way torestore taxes on prepaid mobile cards. The annual collection from these taxeson prepaid cards alone is around Rs80bn, which can help plug half of the revenue demand for the first year of the pogramme.