Islamabad: Pakistan has entered a high tax environment for the foreseeable future with Rs1.56 trillion additional taxes this year, followed by another Rs1.5tr next year and yet another Rs1.31tr the year after, According to International Monetary Fund (IMF) report release on Monday.
The projections contained in the document show that the authorities have promised to increase FBR’s total Tax collection from Rs3.94tr last year to Rs5.5tr this year and to Rs10.5tr by 2023-24, a cumulative increase of Rs6.564tr in five years. As such, the tax-to-GDP ratio is forecast to soar to 15.3 per cent from 10.4pc this year.
The agreement signed with the IMF by Adviser to the Prime Minister on Finance Abdul Hafeez Shaikh and State Bank of Pakistan Governor Reza Baqir also include to further hike the Electricity tariff by the end of the next month.
According to the IMF report, “Currently, households consuming 300 units or below (about 70 per cent of all household consumers) are insulated from annual tariff increases. The authorities will continue with this practice and will moreover allocate for this year a new subsidy equivalent to 0.1–0.2% of GDP to insulate those same consumers from the impact of the recently introduced quarterly tariff adjustment.”
Speaking to the press via conference call, IMF mission chief for Pakistan Ernesto Ramirez-Rigo said the government was expected to ensure this increase came from broadening the base rather than raising tax rates.
The IMF report also suggested strong financial support to the authority’s policy efforts by Pakistan’s international partners is essential to meet the large external financing needs in the coming years and allow the program to achieve its objectives.
Moreover, the IMF said Pakistan is facing significant economic challenges on the back of large fiscal and financial needs, with weak and unbalanced growth.
