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ISLAMABAD: The government has committed to the International Monetary Fund (IMF) to sustainably raise additional revenue by targeting undertaxed sectors such as agriculture and construction, broaden the tax base, and improve progressively.
In the Letter of Intent (LOI) submitted by the government to the IMF, the government has reiterated its commitment not to launch any new tax amnesties or grant further any new tax exemptions in 2023-24 including through the budget or statutory regulatory orders(SROs) without prior National Assembly approval.
According to the IMF report, titled, “Country Report, Request For A Stand-By Arrangement” released on Tuesday, the IMF has projected Rs9,415 billion as tax collection target for the Federal Board of Revenue (FBR) for 2023-24. Out of this, direct taxes target has been set at Rs3,884 billion; sales tax Rs3,607 billion; customs duty Rs1,324 billion, and the target of federal excise duty (FED) has been projected at Rs600 billion for 2023-24.
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The IMF criticised that despite the measures taken in February 2023, the budget deficit is projected to reach one percent of the GDP in FY23. Total tax revenue is projected at 9.9 percent of the GDP, compared to the 10.8 percent projection targeted at the time of the February Supplementary Finance Bill, 2023. In addition to the lower revenue resulting from import suppression, other delays have also played a role; for instance, implementation gaps in track-and-trace have led to early signs of increased cigarette contraband, partially undermining the gains from recent FED increases and require the authorities to quickly correct these gaps. More generally, revenue efforts to broaden the tax base fell short of expectations during the Extended Fund Facility (EFF) period, and the tax-to-GDP ratio has declined.
The report revealed that the budget (2023-24) aims to set in a gradual fiscal improvement and to strengthen tax revenues to 10.3 percent of GDP on the back of measures worth over Rs254 billion (almost ¼ percent of GDP) so that Pakistan has space to scale up investment in social and development sectors.
The measures included (i) an increase in the maximum PDL having an impact of Rs79 billion. The maximum will be raised to Rs60 per litre, with a path to reach an average rate of Rs55 per litre over 2023-24;(ii) an increase of personal income tax (PIT) having a revenue impact of Rs30 billion.
Copyright Business Recorder, 2023