ISLAMABAD: A few days after receiving IMF $1.05 billion tranche of loan, Finance Minister Shaukat Tarin said the implementation of total conditions of the IMF is a wish-list and its complete enforcement may not be possible.
He said that the government would renegotiate with the International Monetary Fund (IMF) on tax reforms in the Personal Income Tax, exemptions and change the existing income tax slabs.
Finance Minister stated this while speaking at the second Computerized Draw on POS Prize Scheme held at the FBR Headquarters in Islamabad.
Tarin said, “We have negotiated with the IMF in the past and would do it again as the wishlist cannot be implemented in totality.”
Tarin responded, “What do you think that whatever the IMF demands, we agree to all their demands? Things are not like that. Did I agree to all earlier demands of the IMF? We have to sit with the fund and hold discussions on each issue with them. The Personal Income Tax (PIT) is the wishlist of the IMF. He said that the government will not withdraw all things under the PIT without further negotiations with the IMF,” he added.
To another query about increases in POL prices, he replied that the prices have been revised upward keeping in view international prices, last time we have not increased prices of the POL products.
Addressing the gathering, Tarin said that Pakistan could not achieve inclusive and long-term growth with the existing low level of tax-to-GDP ratio standing at 10 percent.
Tarin said, “Pakistan has failed to achieve long-term sustained growth mainly because of three major reasons including low savings rate, the yawning gap between exports and imports, and low agriculture productivity.” In order to achieve over six percent growth, the government would have to substantially raise the tax-to-GDP ratio up to 20 percent.
China’s tax-to-GDP ratio stands at 40 percent, while Turkey and Thailand also achieved higher tax-to-GDP ratio, so Pakistan would have to overcome its “fault lines” to improve its taxation, he said. He warned that the government would take action against those who deducted general sales tax (GST) from customers but pocketed the deducted amount. Although, he did not want any kind of harassment but appealed to all the retailers to deposit the deducted amount into the national kitty, he maintained.
He regretted that out of 220 million population, there were only three million return filers and one million filed returns just for the purpose of avoiding charging of full withholding taxes. Thus, there are only two million taxpayers. He said that Germany’s finance minister told him that there was no representation without taxation but Pakistan’s culture was quite different. Pakistan’s tax base was quite low and the country was lagging behind as there should be only two major taxes including Income Tax and second consumption tax known as GST. “There is no short cut and there is a need to do away with other taxes such as in the shape of different withholding taxes,” he added.
