Economic team rules out possibility of additional taxes

Islamabad: According to The News, the economic team of the ruling coalition ruled out the possibility of imposing additional taxes on Tuesday, citing the shortfall in tax revenue caused by the flood-ravaged economy.

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 disclosed that the International Monetary Fund (IMF) is likely to grant Pakistan loan concessions in light of the devastating floods.

Pasha informed the committee that nine million people have fallen below the poverty line and that Pakistan’s economic growth rate may fall short of the target by more than 2 percentage points due to the recent floods.

Ahmed stated that although the Fund had expressed pleasure with the country’s tax receipts last month, political and economic uncertainty in the country may cause the revenues to decline in the following months.

From July through October of 2022, FBR collected Rs2,149 trillion. The sales tax and customs duty goals could not be met, but the income tax goal was met. As a result of a drop in imports, cuts in PSDP (public spending) and rising inflation, tax revenue may be impacted.

In addition, he clarified that the government has no intention of imposing new taxes at the IMF’s request. This year, he reported that 100,000 new taxpayers have filed tax returns. Extending the deadline for filing tax returns will increase the number of filers even further.

Additionally, the FBR chairman stated that direct taxes account for 62% of total tax revenue. The FBR collected Rs52 billion in taxes during the previous fiscal year through income tax returns. As a result of the GDP rebasing, Ahmed noted that the current tax-to-GDP ratio of 9% has fallen.

During his tour of the United States, the chairman of the committee, Qaiser Ahmad Sheikh, questioned what conditions the IMF and World Bank imposed and what guarantees the finance minister provided.

During a recent visit to the United States, the Pakistani delegation held 54 important meetings with IMF, World Bank, and other officials, according to Pasha.

She stated that the IMF had been briefed on Pakistan’s revenue and flood situation and that the Fund would send a report to its board, after which the board would likely grant Pakistan loan concessions.

Not only did we inform the IMF and the World Bank of the damages caused by the flood, but we also requested that the international community compensate Pakistan.

“We will have a detailed discussion with the IMF on this topic at the end of November,” Pasha said, adding that the economic goals for the current fiscal year have also been revised.

As a result of the revised targets, the FBR’s revenue is also likely to be impacted, while imports will drop to 20% in November due to flooding.

According to the Ministry of Planning’s estimates, the flood caused a $30 billion loss, she stated.

“We spent Rs120 billion immediately to give money to flood-affected people, and the World Bank, IMF, and the international community have expressed sympathy for Pakistan’s flood-related losses,” Pasha said.

She added that Pakistan would receive a $500 million grant from the World Bank and a $1.5 billion loan from the Asian Development Bank (ADB).

On the other side, the government has also issued a package for farmers in light of the agricultural loss caused by the floods. The United Nations is also contributing to Pakistan’s climate change damage compensation.

PPP’s Nafisa Shah accused the FBR of harassing taxpayers and stated that all of the municipal funds in her hometown, Khairpur, have been frozen, which is not unique to the city. She stated that similar complaints emanate from other communities as well.

“The FBR has frozen the account of Municipal Committee Khairpur, and the salaries of MC employees in disaster-stricken areas have been withheld,” she lamented. The committee ordered the FBR to resolve the issue without delay.

A senior official of the Ministry of Finance stated, following the committee meeting, that future revenue collection is expected to decrease, and expenditures are likely to increase due to a decline in economic growth and variations in other economic variables caused by the floods.

The official stated that daily negotiations with the IMF are conducted through video links and that there is no truth to rumours that the IMF is demanding the introduction of new taxes.

He stated that the political climate in the country is also a factor in the IMF’s decision to delay the deployment of a staff-level mission. Nonetheless, he recognized that the IMF has been pushing for a rise in the tax-to-GDP ratio.

The official stated that the ninth review discussions with the IMF will likely last for five days, as exchanging economic data is routine.

After the devastation caused by the floods, the country has requested aid from the Fund or a waiver of the budget deficit ceiling.