ISLAMABAD: The International Monetary Fund (IMF) has projected that revenues of the Federal Board of Revenue (FBR) would increase to Rs 0.5 trillion by the year 2023-24.
In its recently published staff report on Pakistan, the IMF projected that the FBR is likely to collect around Rs5.5 trillion during the current fiscal year which would increase to Rs7.001 trillion in next year while in 2021-2022 the revenues would reach to Rs8.3 trillion and Rs9.48 billion in the subsequent year.
The overall revenues of the country will surge to Rs7.165 trillion in 2019-20 followed by Rs8.9 trillion in 2020-21, Rs10.6 trillion in 2021-22, Rs12.12 trillion in 2022-23, and Rs13.37 billion in 2023-24. The report said that the rapid growth of tax revenues in coming years would be ensured by the policy measures committed by the Pakistan authorities.
With less than 1.5 million taxpayers filing tax returns and tax compliance generally very low, tax policy and tax administration measures will centre on broadening the tax base while maintaining a low tax rate, aiming to ensure progress of the tax system, it added.
Staff and the authorities concurred that an additional 4-5 percentage points of GDP in additional tax revenues could be achieved by the end of the program, bringing Pakistan tax ratio in line with peer Emerging Markets.
In the near term, measures include removing exemptions and preferential treatment to reduce distortions in the tax system and broaden the tax base.
These include the removal of GST exemptions and preferential rates, except for basic food and medicines, a measure that will significantly improve revenues, the report added.
Greater inter-provincial harmonization and coordination of GST will also simplify filing procedures and increase compliance.
Over time, the authorities of Pakistan are committed to taking steps to transform the GST into a broad-based VAT and making the PIT fairer and more progressive by raising the upper-end of the PIT structure and consider eliminating PIT tax credits and deductions for the higher income brackets.
In addition, other tax policy measures include: (i) further strengthening taxation on real estate and on agricultural turnover or income by provinces; (ii) ensuring equivalent taxation of all sources of income; and (iii) eliminating distortionary withholding taxes.
Implementation of a full, risk-based audit framework will be facilitated by the recent reversal of legal provisions limiting the use of tax audits and will be supported by an increase in legal penalties for noncompliance.
Moreover, licenses for the track-and-trace system for excises on cigarettes will be issued by end-September 2019 (structural benchmark), with a system rollout by end-March 2020. The government is also considering options to make Pakistan’s tax administration less fragmented and more business-friendly, including through the creation of a new semi-independent national tax authority to collect the main revenue sources, it added.
Meanwhile, the IMF has projected that the pressure of current account deficit will also ease out gradually from its peak US$19.9 billion in 2017-18 to as low as $6.95 billion in current fiscal year while $5.49 billion in 2020-21. The trade deficit would also decline to $24.9 billion in the current fiscal year from $29.46 billion in 2018-19, however, it will further go up to $26.8 billion mainly on the back of growing import needs in coming years.