Personal Taxes

IMF Seeks Reforms To Enhance Private Earnings And Company Taxes: FBR Chairman

The logo of the International Monetary Fund (IMF) can be seen in front of the main building in Washington, USA Photo: file

  • “The income tax reforms are one of the demands of the IMF, since the country is currently under the fund program,” says FBR boss.
  • Ashfaque Ahmed says he is personally not in favor of getting $ 400 million in loans from the World Bank (WB).
  • “We will soon introduce reforms in income tax and remove distortions in the GST,” said the chairman of the FBR.

ISLAMABAD: The Chairman of the Federal Board of Revenue (FBR), Dr. Ashfaque Ahmed, underscoring the need for the IMF program, said the fund is calling for reforms to increase income and corporate taxes, remove GST bias and implement a sustainable revenue collection mechanism.

Ashfaque Ahmed spoke here on Wednesday at the Pakistan Prosperity Forum 2021: “The reforms of the income tax are one of the demands of the IMF, since the country is currently under the fund program. We will soon introduce reforms in income tax and remove distortions in the GST. ”

He also said that he is not personally in favor of receiving $ 400 million in loans from the World Bank (WB) under the Pakistan Raises Revenues (PRR) project to reform the FBR, but the Treasury Department requested Foreign exchange extended support for it.

The FBR chairman said the tax machinery was used to obtain rupee components as the Treasury Department needed foreign exchange to meet its obligations.

He said the rupee component was given through additional grants and Rs 2.5 billion in the FBR’s final fiscal year in May 2021. The FBR is still resource hungry, he added.

He said the FBR is facing numerous challenges due to its fragmented financial base, with the center and provinces having different competencies according to constitutional obligations.

The provinces are responsible for collecting agricultural income tax (AIT) and GST on services, he said. The FBR has offered the provinces to share the data and has asked for permission to collect the AIT on behalf of the provinces and is still awaiting a response from the federating units.

He outlined various other challenges facing the FBR, including a lack of automation, low compliance rate, data compartment approach, complicated tax laws, retail rigidities, inability to capture supply chains for taxation, incorrect invoicing, smuggling, and financial and administrative autonomy of the Tax administration.

He also said the National Tax Authority was also in the pipeline, but tax harmonization was one of the government’s top priorities.

The FBR chairman said the tax authority’s tax rate is 10 percent, while the spending rate is over 20 percent.

He said there are 7.1 million registered tax collectors, of whom only 3.1 million have filed income tax returns, and there is still a 4 million tax collectors gap. Although the number of applicants rose from 1.4 million in 2015 to 3.1 million in 2021, the tax revenue per applicant fell, which must be reversed.

FBR envisages a 10-point plan for the introduction of the intelligent tax model

He said the FBR has a 10-point plan to put in place a smart tax model with an emphasis on centralized planning and monitoring, which will automate, align revenue streams, realign the jurisdiction, restore the tax administration’s credibility, Fight against smuggling, internal complaint procedures, regional taxpayer offices (RTOs) free of tax targets and relief.

He said FBR’s administrative costs accounted for 0.6 percent of total revenue collected, of which 80 percent was used to pay staff salaries. He also said the FBR’s collection remained at Rs.3.8 trillion in three years from 2017 to 2019, but increased to Rs.4.734 trillion in 2020-21. In the first four months (July-October), he said FBR collection exceeded its target by 235 billion rupees and raised 1.842 trillion rupees in the first four months of the current fiscal year.

When asked, he said that Pakistan had never violated the OECD’s confidentiality clauses on information exchange. When asked who was responsible for delivering consistent revenue growth from tax year 2017 to 2019, he said he did not want to comment, but added that the FBR needed an improved system and more oversight to get the performance it wanted .

Originally published in The News

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