“IMF pushes for reforms to increase corporate income tax, corporate tax”
ISLAMABAD: RBF Chairman Dr Ashfaque Ahmed said IMF demands reforms to increase personal income tax (IRP), corporate income tax, remove GST distortions , strengthen implementation capacity and achieve a sustainable revenue collection mechanism.
He also said he was not personally in favor of obtaining loans of $ 400 million from the World Bank (WB) under the Pakistan Raises Revenues (PRR) project to introduce reforms in RBF, but the finance ministry needed foreign currency, so they extended support it.
“Personal income tax reforms are part of the IMF’s demands because the country is currently under the Fund’s program. We will soon reform personal income tax and remove distortions from the GST, ”BRF Chairman Dr Ashfaque Ahmed said on Wednesday during a speech at the Pakistan Prosperity Forum 2021, hosted by the Market Economy Research Institute (PRIME) Wednesday.
The chairman of RBF said the tax mechanism used to obtain rupee components because the finance ministry needed foreign currency to fulfill its obligations. He said the rupee component was provided through additional grants and that in the last fiscal year RBF received 2.5 billion rupees in May 2021 when there was not enough funding. time to use resources. The RBF is always strapped for resources, he added.
The World Bank’s IDA loan is cheap but he will not be happy to get a loan to introduce reforms in RBF, he added.
He said the RBF faces many challenges due to the fragmented tax base where the Center and the provinces have divergent jurisdiction under constitutional obligations. The collection of farm income tax (ACI) and GST on services is the responsibility of the provinces. The FBR offered to the provinces to share the data and requested permission to collect the AIT on behalf of the provinces and is still awaiting the response from the federating units.
He described various other challenges facing RBF, including lack of automation, low compliance rate, siled approach to data, complicated tax laws, retail rigidities, lack of capacity to seize supply chains for taxation, incorrect billing, smuggling, and financial and administrative aspects. the autonomy of the tax administration. He also said that the National Tax Agency was also on the cards, however, harmonizing taxes was one of the government’s top priorities.
He said that the RBF’s tax-to-GDP ratio was 10% while the expenditure-to-GDP ratio was over 20%.
He said there were 7.1 million registered tax filers out of which only 3.1 million filed tax returns and there was still a gap of 4 million tax filers. Although, he said, the number of filers fell from 1.4 million in 2015 to 3.1 million in 2021, the tax return on the filer basis had declined and needed to be reversed.
He said the RBF is considering a 10-point plan to place the smart taxation model under which the focus is on centralized planning and centralized monitoring, bringing automation, revenue resource alignment, realignment of jurisdiction, restoration of the credibility of the tax administration, suppression of smuggling, internal complaints mechanism, regional taxpayer offices (RTO) exempt from tax target and facilitation.
He said the administrative cost of RBF was 0.6 percent of the total revenue collected, of which 80 percent was used for the payment of labor wages. He also said that the RBF collection remained stable at 3.8 trillion rupees in three years from 2017 to 2019, but increased to 4.734 billion rupees in 2020-2021. In the first four months (July-October), he said the RBF fundraising exceeded its target of 235 billion rupees and raised 1,842 billion rupees in the first four months of the current fiscal year.
Responding to a question, he said Pakistan had never violated the OECD’s confidentiality clauses for information exchange. When asked who would be held responsible for the steady growth in income from the 2017 to 2019 tax year, he replied that he did not want to comment, but added that RBF needed a system. improved and increased monitoring to achieve desired performance.
Tax experts Huzaima Bukhari and Dr Ikram Ul Haq have occasionally said that the rich do not pay taxes and there is a need to simplify tax laws. Supreme Court attorney and tax expert Dr Ikram Ul Haq said the PTI-led government continues to tinker with the tax system. He proposed lowering tax rates; Income tax rate should be lowered by 10% on average, single-digit sales tax from 5-6%, and single-digit tariffs to lower tax rates and expand the tax base. He said the ratio of direct taxes should be increased to 66%, while the rest are indirect taxes, with the aim of shifting the tax burden onto the upper class of society.
He said there were 107 million broadband subscribers and there was a need to simplify the tax system to get them into the tax net. He proposed to the government to simplify tax laws, abolish all tax exemptions and minimize regulations. He said the cost of tax exemptions was Rs 2.3 trillion and fundamental reforms were needed to overhaul the tax system. He said there was a need to establish the Pakistan Revenue Authority (PRA).
PIDE Vice-Chancellor and renowned economist Dr Nadeem Ul Haque said on the occasion that policymakers, including politicians, bureaucrats and donors, were not listening and asked if anyone representing political elites, bureaucrats and donor representatives were present in the room. No one of these segments was found in the lobby.