Wednesday Nov 16, 2022
ISLAMABAD: The ruling coalition's economic team on Tuesday ruled out the possibility of imposing additional taxes citing the shortfall in tax collection due to the flood-hit economy, The News reported.
Chairman of the Federal Board of Revenue (FBR) Asim Ahmed and State Minister for Finance Aisha Ghous Pasha briefed the National Assembly’s Standing Committee on Finance and Revenue, during which it was also revealed that the International Monetary Fund (IMF) is likely to give concessions in loans to Pakistan in light of the cataclysmic floods.
Pasha told the committee that nine million people have gone below the poverty line, while Pakistan's economic growth rate may fall short of the target by more than 2% due to the recent floods.
Ahmed said that although the Fund had expressed satisfaction over tax revenues last month, however, due to political and economic instability in the country, the revenues may come under pressure in the coming months.
FBR has collected Rs2.149 trillion from July to October 2022. The target of sales tax and customs duty could not be met, but the target of income tax has been achieved. With a decline in imports, cuts in PSDP (public spending) and high inflation, the tax revenue may be affected.
He also clarified that government does not have the intention to impose new taxes on the demand of the IMF. He said that 100,000 new taxpayers have submitted their tax returns this year. The extension of the date for filing tax returns will further increase the number of filers.
The FBR chairman further said that the rate of direct taxes in the total tax revenue is 62%. The FBR had collected Rs52 billion in tax in the last financial year on account of income tax returns. The tax-to-GDP rate is currently 9% and this has been decreased due to the rebasing of GDP, Ahmed added.
Committee Chairman Qaiser Ahmad Sheikh questioned what conditions were imposed by the IMF and World Bank and what assurances were given by the finance minister during his US tour.
Pasha said the Pakistani delegation held 54 important meetings with IMF, World Bank, and other officials in a recent visit to America.
She said the IMF has been briefed on the revenue as well as the flood situation and the Fund will send the report to its board after which the board is likely to give concessions in loans to Pakistan.
“We not only informed IMF and World Bank about the damages caused by the flood but we also asked the world to pay compensation to Pakistan.”
“We will have a detailed discussion with the IMF at the end of November on this matter,” said Pasha, adding economic targets for the current financial year have also been revised.
The FBR revenue is also likely to be affected after the revision of targets whereas imports will further fall down to 20% in November due to the floods.
She said that according to the estimates of the Ministry of Planning, the flood caused a loss of $30 billion.
“We have spent Rs120 billion immediately to give money to flood-affected people while the World Bank, IMF and the international community have expressed their sympathy to Pakistan for losses due to the flood,” said Pasha.
She further said World Bank will give a $500 million grant while Asian Development Bank (ADB) will also give a $1.5 billion loan to Pakistan.
On the other hand, the government has also announced a package for farmers due to the agricultural damage caused by the floods and the UN is also playing its part in paying compensation for climate change damage to Pakistan.
PPP's Nafisa Shah alleged the FBR of harassing taxpayers and stated that all the funds of her hometown municipality namely, Khairpur, have been frozen and this was not specific to the city alone. Similar reports are also coming from other municipalities as well, she said.
“The FBR has frozen the account of Municipal Committee Khairpur and salaries of MC employees of disaster-affected areas are being withheld,” she deplored. The committee directed the FBR to resolve the matter at the earliest.
Following the committee meeting, a senior official of the Ministry of Finance said future revenue collection is expected to witness a decrease and expenditure is likely to increase due to a decline in growth and variation in other economic variables caused by the floods.
The official said the negotiations with the IMF are being held on a daily basis through video link and there is no veracity in reports of introducing new taxes on the demand of the IMF.
He said that the political situation in the country is also one of the factors for the delay in fielding a staff-level mission by the IMF. However, he acknowledged that the IMF has been pressing for an increase in the tax-to-GDP ratio.
The official said the ninth review talks with the IMF are likely to continue for five days as the process of sharing economic data is being done on a regular basis.
After the devastating floods, the country has requested the Fund for relief or a waiver in the budget deficit ceiling, he added.