Talks with IMF, economic team pledges to explore alternative avenues for enhancing federal revenues
ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have reached an agreement on a pivotal condition during their economic review discussions. The Pakistani government has committed to digitalizing the country’s tax system, a strategic move aimed at enhancing efficiency and revenue collection.
This decision, finalized during the latest economic review meetings of the Standby Arrangement Program, underscores Pakistan’s dedication to modernizing its tax infrastructure. The agreement, which entails collaboration with the Karandaaz Company in digitalization endeavors, was formalized through a signing ceremony attended by Chairman FBR Malik Amjad Zubair Towana and senior officials from the Ministry of Finance.
The shift towards digitalization is anticipated to yield numerous advantages, including streamlined operations within the tax administration, reduced expenses for taxpayers, an expanded tax base, and a sustainable increase in revenue, as outlined by the Federal Board of Revenue (FBR). However, the Pakistani economic team firmly rejected another major demand from the IMF – a reduction in the share of funds allocated to provinces under the National Finance Commission (NFC) award. The NFC award allocates federal tax revenue between the federal government and the provinces, with provinces currently receiving 57.5 percent of the revenue share and the federal government receiving the remaining 42.5 percent.
Despite this, the economic team has pledged to explore alternative avenues for enhancing federal revenues and to collaborate with provinces on NFC-related matters. Proposed measures include joint efforts to address electricity losses and security expenses, as well as the development of a collective strategy concerning the Benazir Income Support Program expenditures. The IMF has deemed the 42.5 percent funds held by the federation under the National Finance Commission Award as insufficient and has called for a review alongside the provinces.
