IMF asks Pakistan to increase income and sales tax, regulatory duty

Pakistan has been asked by the International Monetary Fund (IMF) to take additional taxation measures in the shape of income and sales taxes and regulatory duty (RD) to pull up the annual tax collection target from Rs5.8 trillion to Rs6.3 trillion.

This new demand by the IMF comes during the ongoing virtual talks in the context of losses incurring on the account of non-collection of petroleum levy of over Rs600 billion during the current fiscal year.

The government will have to take additional revenue measures on the FBR front to bridge the gap that surfaced on account of non-collection of petroleum levy, an official was quoted as saying by the publication.

Another recommendation by the IMF is to increase the base price of the electricity tariff to the tune of Rs1.40 per unit to curtail the surge in circular debt.

Pakistani authorities have made quarterly adjustments to the power tariff, but if the base price is not increased, it is feared that the pace of accumulation envisaged under the Circular Debt Management Plan (CDMP) won’t be materialised, the publication reported.

“Talks are underway and both sides may evolve a consensus on a staff-level agreement whereby the FBR’s target may be jacked up from Rs5.8 trillion to Rs6-6.1 trillion for the current fiscal year in the wake of FBR’s increased collection at import stage,” top official sources confirmed to the publication.

IMF has also made a suggestion to increase the rate of personal income tax by adjusting the higher income bracket earning Rs75 million on an annual basis, the officials said. There are different proposals under consideration to adjust the rate of personal income tax to fetch an additional Rs100 billion to Rs150 billion.

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