Additional revenue generation: IMF informed of strong resistance in parliament

Pakistan has conveyed to the International Monetary Fund (IMF) that the additional revenue generation measures in current fiscal will be difficult in view of the strong resistance to revenue measures during the parliamentary debate for approval of Finance Act 2009.
In view of the considerable criticism to revenue measures during the parliamentary debate on the budget, the authorities felt that submitting additional revenue measures would be difficult and could only be done, if necessary, in the context of a supplementary budget later in the year.
According to the discussions on revenue polices between the IMF and Pakistani authorities, mentioned in the " Second Review and Request for the Augmentation of Access Under the Stand-By Arrangement," Pakistani authorities believe that the additional revenue measures are politically unfeasible in the near future.
In this context, they stressed the need for preserving their political and institutional capital for the introduction of the value-added tax (VAT). The IMF staff acknowledged this point, but indicated that to reduce vulnerability and provide resources for the needed outlays, additional donor support would be available only for a limited period. For this, a strong revenue effort was needed.
The IMF staff also pointed out the significant risks related to the rather optimistic revenue projections and the effects of the delays in tax administration reform could undermine revenue performance early in the current fiscal year.
The Pakistani authorities renewed their commitment to press ahead with the introduction of a broad-based VAT in 2010-11. They recognised that time was of the essence, and emphasised that the introduction of a broad-based VAT in mid-2010 was a key pillar of their medium-term fiscal strategy.
To help build a consensus for the VAT within the government and discuss options for its introduction, the Pakistani authorities will organise a high-level conference in September with the Federal and provincial participation. To ensure its timely introduction, the authorities will prepare by end-September 2009 a detailed time-bound action plan for VAT implementation. A draft VAT law is expected to be submitted to parliament by end-December.