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The International Monetary Fund (IMF) has requested Pakistani authorities to provide statistics with respect to interest and amortisation payments of major public enterprises, budgetary expenditures, including subsidies, grants, net lending and earthquake-related spending, official sources told Business Recorder on Thursday.
The IMF is to review performance of Pakistan''s economy from July 3, as scheduled under the 7.6 billion-dollar standby arrangement, for which a team of the Finance Ministry, led by Finance Secretary Salman Siddique will face the Fund''s panel in Istanbul, Turkey. The sources said the Pakistani team had been requested to provide details of Federal Board Revenue (FBR) revenue data for June 2009, including a two-year time series with a breakdown of direct taxes into its components.
Major revisions to the taxes, announced on June 13 in the budget, were revised downward a mere five days later, which are estimated to reduce the government revenue by Rs 22 billion. In addition, the government announced a rise in pay and pensions from 15 percent (as announced on June 13) to 20 percent as announced five says later.
The only reduction, announced by the State Minister for Finance and Economic Affairs, was Rs 183 million in the annual allocation for National Accountability Bureau (NAB). The consequent rise in the budget deficit was not noted by the government. It is a foregone conclusion that this raised serious concern within the IMF team dealing with the Pakistan authorities.
Budgetary revenues for all categories, including all non-FBR collected revenue, ie carbon tax and non-tax revenues and external budgetary financing with a detailed breakdown as well as domestic bank and non-bank financing and public debt, will be provided to the IMF team and will be an integral component of the discussions.
The sources said the IMF had also asked the Finance Ministry to provide detailed breakdown of the sub-category of current spending labelled "running of the civil government", separating in particular the wage bill and goods and services, for the FY 2005-06, FY 2006-07 and FY 2007-08, the first three quarters of the FY 2008-09 (actual execution data).
Another major demand sent by the IMF is that the FBR should provide a four-year detailed breakdown of customs duties and excise taxes (monthly data for the period July 2005-June 2009). Monthly tax base data for each individual excise tax and customs duty like tobacco products, actual or estimated monthly quantities, will also be submitted to the review mission.
"Documents relating to tax policy reforms that are included in the 2009-10 budget, including detailed calculations of their revenue impact will be also be placed before the IMF team," the sources said. According to the sources, the Finance Ministry''s team will share draft legislation with the IMF regarding structural performance criterion.
The government has to submit, by end-June 2009, draft legislative amendments to parliament to harmonise income tax and general sales tax (GST) laws, including for tax administration purposes, and to reduce exemptions for both taxes, but independent analysts claim this has not been done. On tax administration reform, the IMF has asked for the following documents:
-- The Executive Order by the FBR Chairman to implement the new FBR management structure.
-- The presidential decree to establish the two new occupational groups (domestic taxes and customs).
-- The government ordinances to change the related laws and rules (eg income and sales tax laws).
-- Draft legislation, which will be submitted to the parliament, to make these legislative changes permanent.
Detailed projections for all tax and non tax revenues in 2009-10, especially assumptions with respect to macroeconomic indicators, tax administration reforms, tax compliance trends and progress in implementing reform agenda in the area of public financial management in line with fiscal ROSC recommendations will also be provided to the IMF team.
In particular, completion of on-going implementation of a single treasury account and strengthening of co-ordination between the Planning Commission and the Ministry of Finance in the context of the implementation of the medium-term budget framework will also be the subject of review.

Copyright Business Recorder, 2009

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