Pakistan has asked the International Monetary Fund (IMF) to reduce collection target from Rs5.9trillion to Rs5.5tr for the upcoming budget. The major reason for this is the on-going third wave of COVID-19 pandemic in the country.
For budget 2021-22, tax collection target of Rs5,936billion was given to Federal Board of Revenue (FBR). This was against a downward revised target of Rs4,691bn for the outgoing fiscal year in its latest staff report released after completion of the second to fifth reviews under $6bn Extended Fund Facility (EFF) for Pakistan.
But Pakistan officials are of the view that there is still a wide gap between IMF’s given targets and potential of FBR to reach them in next year, “It will not be possible to abolish the GST exemptions related to agriculture and health because it will hike inflationary pressures and make the health sector expensive when the third wave of COVID-19 pandemic is gripping the country,” an official source told a local newspaper.
FBR’s tax revenues might go up to Rs5,287.5bn with nominal growth of 12 per cent to 12.5 per cent on the basis of revised tax collection of Rs4,700bn for the outgoing fiscal year.
With subject to better handling and effective implementation, the FBR can increase collect up to Rs200bn so the FBR could collect up to Rs5.5tr.
The official said that FBR’s target of Rs5,963bn for the upcoming budget is too ambitious and cannot be materialized at all.
Things are moving fast and it is very difficult to predict regarding the target for next financial year, said FBR Chairman Asim Ahmed. But we are focusing on broadening the tax base by using technology.
The IMF demands Pakistan to reach its fiscal objective by increasing the tax base, simplifying and modernising the existing tax system and reducing informality.
IMF resident chief in Pakistan Daban Teresa Sanchez said they are ready to help Pakistan during the testing COVID-19 crisis while ensuring the objective of debt sustainability and economic growth are reached.