Islamabad:
The Minister of Finance, Muhammad Aurangzeb, reaffirmed Pakistan’s commitment to increase the tax perception to 11% of GDP by the end of the exercise on Wednesday, despite the Federal Board of Revenue (FBR) which missed its quarterly RS198 billion objective.
Aurangzeb told journalists after a meeting of the parliamentary committee that the negotiations with the IMF progressed in the “good direction”.
In addition, Pakistan informed the IMF that its requirement to make public declarations of senior officials public – including the beneficiary owners and family members – would only apply to civil servants, and not to judicial institutions or other state establishments.
“We are very clear that we remain determined to reach the FBR tax ratio / GDP of 11% by the end of this exercise,” said the minister in response to questions about the deficit.
He was addressed to journalists after the meeting of the senatorial committee on finance. Senator Saleem Mandviwalla of the PPP chaired the meeting.
For the current exercise, the IMF set Pakistan a goal of increasing the FBR tax ratio / GDP by 0.7 percentage points to 11%. This results in an annual collection objective of RS14.13 Billion, requiring extraordinary application measures and significant efforts to expand the tax base. The FBR will have to go beyond the advantages such as cars and multiple wage increases for officers, and rather focus on the widening of the taxpayers’ base to achieve the objective.
During the previous financial year, the FBR had missed the IMF benchmarks on the two charges: the tax ratio / GDP slipped below the 10.5%target, while the absolute collection also failed nearly RS13 billion rupees.
Against the objective of July-September of RS3,083 Billion, the FBR collected Rs 2,885 Billions. He underwent a deficit of RS198 billion in the space of only three months despite the launch of several initiatives, including a strongly funded FBR transformation plan.
The Minister said some of the income was linked to disputes, hoping that decisions about them can make up for the deficit in income suffered in the first quarter. But he said it belongs to the courts how they decide on business.
The FBR said that 177 billion tax revenue rupees were blocked at the Supreme Court of Pakistan and that it has now transmitted to the IMF that the Supreme Court should announce a decision this month. However, insurance similar to the IMF were also given during the last financial year.
The disputed cases imply the challenges of taxpayers against the retrospective application of the super tax and the government’s decision to impose additional levies on 10 sectors of the economy.
While answering a question of knowing whether the IMF talks would end in time, the Minister of Finance said that “so far, so good”. He added that the IMF talks covered both quantitative performance criteria and structural references.
“Whatever the discussions that occur, they play in the right direction,” added the Minister of Finance.
Asset declarations
The sources said that at the beginning of this week, the firm’s division also gave a briefing to the IMF on the status of implementing a condition to modify the law on civil servants in order to ensure that the asset declarations of high -level civil servants, including assets belonging to them and to a family member, are digitally deposited and accessible to the public by the FBR.
The IMF has been informed that by virtue of the law on civil servants, only the employees of the federal government are covered while the judiciary and the military officers do not fall under the law.
The IMF has inquired about the responsibility mechanism of civil servants with differences in their asset declarations. It has been informed that the FBR cannot assess these declarations for any escape from income tax and cannot examine assets with the lenses of corruption practices, sources said.
The discussions have taken place if a new organization should be formed to analyze the asset declarations in depth and not limit them to a simple tax evasion, the sources added.
However, the Condition of the IMF remains largely ineffective, because even the majority of civil servants do not fall in its field.
The law stipulates that the “civil servant means a person who is a member of a service of all-Pakistan or a public service of the federation or who occupies a civil post in relation to the affairs of the federation, including such a position linked to the defense.
But he does not include a person who is in deputation of the federation of a province or other authority and a person who is employed under contract, or on a workplace or who is paid from contingencies.
Due to a very close definition of a “civil servant”, it is estimated that the assets of civil servants cannot be disclosed. The officers of autonomous organizations, regulatory organizations such as the State Bank of Pakistan, the National Electric Power Regulatory Authority, Oil and Gas Regulatory Authority and Pakistan Telecommunication Authority and provincial civil services will still remain exempt from digital filling and their provincial public disclosure.
In the IMF condition, a new clause 15-a declaration of assets in the old law had been proposed to be introduced to allow the declaration of the assets of the civil servants. The government has also softened the right to access the 2017 information law to allow public disclosure of this information.
The new clause stipulates that “notwithstanding everything that contained in clause G of article 7 of the law of 2017 on the right of access to information, the declaration of assets of an official of BS-17 and more, its spouse and the dependent children, including domestic and foreign assets and passives, which can be prescribed, deposited with the Federal Board of Revenue and the same must be available, FBR, in the contract with the rules, as does, you must be presumed.
