The International Monetary Fund (IMF) has assessed the Federal Board of Revenue’s (FBR) administrative measures designed to generate Rs250 billion by implementing the Compliance Risk Management (CRM) framework and expanding the tax net to millions of retailers.
During ongoing discussions with the IMF, concerns over a significant revenue shortfall of Rs604 billion in the first eight months (July-Feb) of the current fiscal year have been highlighted.
The IMF review mission, currently in Islamabad, is set to begin formal negotiations with Finance and Revenue Minister Mohammad Aurangzeb and his team. These discussions will focus on completing the first review under the $7 billion Extended Fund Facility (EFF).
FBR’s Revenue Measures
The government aims to generate Rs250 billion through administrative measures, including:
- Bringing retailers into the tax net under the Tajir Dost Scheme
- Enforcing the Compliance Risk Management (CRM) framework
- Expanding the Compliance Improvement Plan (CIP)
The FBR has engaged experts to develop the CRM framework and informed the IMF that out of six million tax returns received, Artificial Intelligence (AI) will be used to select 3-5% of cases for audits, with plans to hire independent auditors to strengthen the process.
The CRM framework has already been introduced in Large Taxpayer Units (LTUs) in Islamabad, Karachi, and Lahore, with an automated system ensuring better compliance. Additionally, the Board has integrated data from 145 agencies through Memorandums of Understanding (MoUs) under existing documentation laws.
Expanding Tax Monitoring and Digital Reforms
The FBR is accelerating its efforts to curb tax evasion through digital invoicing and a track-and-trace system. The protocol for tracking goods will be updated to incorporate aggregation, ensuring real-time monitoring across the entire supply chain.
To enhance tax compliance, the IMF will also assess Pakistan’s tax penalty regime and use its findings to develop a General Anti-Avoidance Rule (GAAR).
Economic Performance Review and Future Budget Plans
The IMF review team and the government will evaluate the economic performance for the July-December period and assess potential adjustments in the macroeconomic and fiscal framework for the full 2024-25 financial year. Discussions will also set broad parameters for the 2025-26 budget.
If a staff-level agreement is not reached, final negotiations could extend until the budget’s approval by Parliament.
Power Sector Reforms and Cost Reductions
Meanwhile, Federal Minister for Power Sardar Awais Ahmed Khan Leghari assured international development partners that negotiations with Independent Power Producers (IPPs) remain transparent, allowing options such as arbitration or forensic audits.
Speaking at a session on power sector reforms, attended by representatives from the World Bank, IMF, ADB, IFC, UNDP, AIIB, and other institutions, Leghari outlined strategies to reduce electricity costs for consumers and industries.
Key initiatives include:
- Transitioning from “Take or Pay” to “Take and Pay” contracts
- Phasing out furnace oil-based power plants
- Converting imported coal projects to local coal
- Upgrading transmission lines and introducing battery storage systems
- Developing regulatory frameworks for Special Economic Zones (SEZs)
Leghari also highlighted plans to privatize power distribution companies (Discos) and implement governance reforms to eliminate circular debt within five to eight years.
The government is also reviewing the rationalization of net metering, which currently adds an estimated Rs150 billion burden on consumers.
With Pakistan transitioning to a wholesale electricity market and halting new power purchases, development partners have welcomed these reforms and pledged continued support.
