Institutional dysfunctionalism and corruption remain paperweights on Khan’s things to do list
The IMF has asked Pakistan to increase its tax collection by 31% to Rs5.1 trillion in the next fiscal year 2020-21, starting July. This will require additional Rs780 billion worth of taxation measures including but not limited to administrative improvements and capacity enhancement, majorly in the Inland Revenue Service.
So far, the Inland Revenue was not part of the IMF negotiations.
If the PTI-led government does make commitment to the IMF for 31% tax revenue collection, it will put the Inland Revenue Service on the frontline –the department is responsible for the collection of income tax, sales tax, and federal excise duty. These three taxes constitute 82% of the total revenue.
However, a significant portion of income tax and sales tax is collected at the import stage by the Customs department, which brings direct collection by the Inland Revenue Service down to around 52%.
The FBR is planning to show 20% additional collection on account of the administrative improvement and enforcement measures.
How the additional 11% (31% – 20%) target for next year could be met may be addressed during negotiations with the IMF or by conducting internal deliberations, says an observer.
Earlier this year, Adviser to PM Khan on Commerce, Textile, Industry & Production and Investment Abdul Razak Dawood pointed out that for the last 30 to 40 years tariff has become a tool for generating tax revenue.
Dawood observed that Pakistan has become an import consumption country instead of a country with exports.
“And along with that Pakistan also faces a taxation issue. It is a daunting task. People say to us ‘who are you?’”
A huge portion of the country’s federal net revenue over the years has been going toward paying debt markup. Example: Last year, Rs2083 was the federal net revenue while markup on debt was Rs2091 billion.
Last month, the World Bank asked Pakistan to upscale its existing Debt Office — from “coordination” to “Debt Management”. It’s a first drastic change since 2005, envisaging a possible shift of debt management from the government to institutions.
Meanwhile, the government this week made major reshuffles in FBR: the Director General of International Taxes has been replaced, and a new member Inland Revenue Operations –which has a 16,000-strong workforce, has been appointed.
The member Inland Revenue is the key post after the FBR chairperson and is responsible for the collection of inland revenue.
Also, last month, Prime Minister Khan approved rules for the “forced retirement” of civil servants, who have become deadwood. Rules have laid down the procedure for forcefully retiring the “corrupt and incompetent civil servants”.
Institutional dysfunctionalism and corruption remain paperweights on Khan’s list of things to do– topping it is his goal to introduce welfare state type measures..
