Islamabad:
The International Monetary Fund (IMF) on Thursday pushed Pakistan on Thursday over the delay in settling more than RS170 billion court cases pending for the constitutional bench, while also questioning authorities for missing last year’s tax collection target.
According to officials, the trial in tax cases – often stemmed from vague legal provisions, retrospective measures or tax needs – to undermine the Federal Board of Revenue’s (FBR) ability to meet its goals, many of which are built on expected recovery from these pending cases.
On the first day of negotiations to complete measures to approve the second program review and the release of a $ 1 billion loan tranche, the IMF team was informed of fiscal developments, unanswered tax targets and the long -term trial. Sources said the fund’s main focus remained the reasons behind the deficit, which was agreed in joint with Pakistan.
It also marked the last mission of Julieth Pico Mejia, the IMF’s outgoing tax expert for Pakistan, which will be replaced by an Eastern European official.
Against the original annual target of RS12.9 trillion, FBR RS11.74 trillion deficiencies collected both the absolute collection target and the agreed increase in the tax-to-BDP ratio to 10.5%.
The FBR could not meet its target, but the tax -gnp ratio increased by 1.4% in the last financial year, said Bilal Kayani, the Prime Minister of Funding, Thursday.
The mission’s face to face started meeting with Finance Minister Muhammad Aurangzeb could not take place on Thursday, which is now scheduled for Monday when the minister returns from Washington. The mission remains in the city until October 8 to also review the implementation of Pakistan’s 26. Program – Climate facility of $ 1.4 billion.
The sources said FBR assessed the IMF that the tax target could not be reached due to lower than expected inflation and economic growth. Inflation fell to 4.5%, while economic growth, especially the large presentation, also remained far below the necessary pace, the IMF was informed.
The IMF was told that FBR collected additional RS2.5 trillion in taxes in the last financial year, and the contribution from inflation was around the RS766 billion, which was lower than the budgeted estimates. Likewise, the new taxes generated slightly over RS800 billion compared to RS1.2 trillion estimates.
One of the reasons for lower revenue generation from the extra tax measures was sluggish economic growth and decrease in the real estate sector, the sources said.
The IMF also took the briefing on the delay in settling the tax cases. FBR had previously informed the IMF that the Supreme Court in Pakistan would make decisions in the cases in connection with super tax, especially in 10 sectors that caused discrimination in the eyes of taxpayers and oil research companies in June this year.
The IMF was informed on Thursday that the cases are still pending even though the daily consultation began from this month. The fund was further informed that the tax authorities are now expecting the point to decide the cases at the start next month. In one of the cases, the arguments have been completed from both sides, while the government’s legal team in another case has completed the arguments.
After the Point Court did not make a decision by June this year, the government had assured the IMF that the case was expected to be decided in late September.
Now it seems that the decision can be announced next month subject to the end of the arguments. But this will in turn lead to missing out on the quarterly tax target by a wide margin, as FBR hoped that in the event of a favorable decision it could get RS177 billion in late September, the sources said.
From Thursday, FBR gathered slightly below RS2.4 trillion in taxes. It needs another RS700 billion in the remaining five days a month to an average of RS140 billion per year. Day. Collection of RS140 billion daily is almost impossible due to overall sluggish economic growth and already heavy progress taken in previous months to achieve the goals.
The IMF was also informed that the number of tax returns until the date has risen to 7.7 million in the tax year 2024 compared to 7 million in the previous tax year.
The Ministry of Finance briefed the IMF on the fiscal results of the last financial year. The government has met the primary budget surplus target of RS2.4 trillion along with the total revenue collected by the four provinces.
This was the second year in a row with the primary surplus and the highest in 24 years that surpassed the IMF goal. The Ministry of Finance tried hard to stay on fiscal policy, but the downturn came from the provincial capitals that were not in control of the federal government.
The total tax deficit also reduced to 5.4% of GDP or RS6.2 trillion, which was good below both the original target of 5.9%.
The provincial governments had given the IMF and the federal government’s understanding of generating RS1.2 trillion cash surplus. However, the four provinces generated a cash profit of RS921 billion, missing the IMF target with 280 billion.
