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Pakistan seeks IMF to drop FATF conditionality, allow reduction in tax target

Pakistan seeks IMF to drop FATF conditionality, allow reduction in tax target

ISLAMABAD: As the final round of talks in this quarter of the year between the federal government of Pakistan and a staff mission of the International Monetary Fund (IMF) enter its final phase in Islamabad, Pakistan actively looks forward to persuade the global moneylender to drop three of its conditionalities, including reduction in tax target, the recommendations of the Financial Action Task Force (FATF) and the bonds guarantee condition, sources told the media on Thursday.

The successful completion of the first review would enable Islamabad to draw about $460 million from the Fund in first part of December this year, taking the total amount to almost $1.44bn. The IMF had made in July this year an upfront disbursement of $991 million on completion of all prior actions committed by Pakistan before signing the fund programme.

The debt-ridden country has sought the IMF to allow reduction in tax collection by Rs233 billion, terminate the condition of the guarantee for issuance of the bonds.

In the meeting today, Pakistan will brief IMF officials on its privatisation programme, and the amount collected in non-tax revenue form amounting to Rs1,400 billion, sources said.

(Non-Tax Revenue is the recurring income earned by the government from sources other than taxes.) The IMF will respond to Pakistan’s demand today or tomorrow.

The IMF’s mission has arrived in Islamabad to conduct the first quarterly review of Pakistan’s performance under its $6bn Extended Fund Facility (EFF) finalised in May this year.

Adviser to the PM on Finance Dr Abdul Hafeez Shaikh is leading Pakistani delegation comprising of finance secretary, the governor of the State Bank of Pakistan (SBP) and the chairman of the FBR.

The visiting team led by Mission Chief to Pakistan Ernesto Ramirez-Rigo is holding policy-level discussions. He has already hold talks with authorities from all the ministries, divisions and departments concerned to examine the latest data before winding up its trip today (Nov. 7).

The first quarterly review is expected to be completed on a positive note as authorities have generally shown good performance on most of the structural benchmarks and performance criteria set for the first quarter ending Sept. 2019.

On Friday, the moneylender urged Pakistan to spend more on development as the combined spending by federal and provincial governments in the first quarter remained less than one-tenth of the annual allocations.

The lower spending on development than the allocated budget during the July-September quarter has also undermined the economic growth prospects in this fiscal year.

The savings by the four provincial governments were more than the amount they spent on development in the first quarter.

Mr Ernesto held meetings with the federal and provincial authorities aimed at aligning fiscal and taxation policies of the Centre and the four federating units.

Sheikh presented Pakistan in the talks and chaired a meeting to review the implementation of the fiscal policies in the provinces under the IMF Programme, according to the finance ministry.

The IMF has recommendation the federal government of Pakistan to establish the Federal Revenue Agency to collect taxes from across the country.

The global moneylender believes that collection of taxes will be more efficient if the revenue agency is formed and maintains that it should collect taxes at provincial and district level.

Thereby, taxpayers will not have to travel to federal, province and district tax offices and all taxes at federal, provincial and district level will be collected at the same place.

The IMF has further recommended that the center could return the taxes to the provinces and districts after collecting it at one place.

In Pakistan, taxpayers are required to fill 47 tax forms and so it is essentially required to simplify tax forms filling and submission process and its collection.

With the recommendation, the IMF maintains that any form of tax can be collected at any tax office across the country.