Finger against tax amnesties

The International Monetary Fund (IMF) head of mission for Pakistan Harald Finger said on Tuesday international experience shows that tax amnesty scheme undermines tax compliance, weakens revenue collection and penalises compliant taxpayers. Speaking to media at a conference call from Washington, he stated that amnesty schemes potentially create expectations for further tax amnesties.
Finger said therefore, it is important that current scheme is implemented in a way that it minimises these elements, adding, that government is borrowing because fiscal deficit is still on the higher side. He further added that IMF hopes consensus can be found in the Parliament with respect to next step towards privatisation of Pakistan International Airlines. About chance of privatisation of PIA, he said that "it is better to do rightly than quickly as it's strategic privatisation; it's a complicated process."
He also expressed the hope that discussions with the provincial government of Sindh on PSM would reach some conclusion one way or another and the process can be forwarded once that decision is made. We will discuss with Pakistani authorities on way forward for fixing underlying problems of loss-making entities. He further stated that fixing underlying problems of loss-making entities is important because these take away public resources from public priority spending.
Finger stated that the gas amendment act was not a prior action in the programme but the authorities say that they are working on the legal provision that can strengthen gas collection. The gas recovery act would be included as benchmark by February 2016 in the programme, he added.
About power sector, he said, an agreement has been reached with authorities for setting quarterly performance of each individual and stated that in the context of Article IV consultation regarding Pakistan real exchange rate the fund performs its assessment, which shows a significant variation and consistency; it pointed some overvaluation of real effective exchange rate.
He said the government is borrowing because fiscal deficit is still on the higher side than it should be, which of course requires significant borrowing. The borrowing comes from banking; therefore, it is important for the government to bring down the fiscal deficit significantly during the next two years to create fiscal space for private sector.
About another IMF programme, he said that the current programme still has significant time and anything about next programme, if authorities' desire, would be subject to a discussion once the current programme is over. He said that growth is projected to remain at 4.5 percent.
He said that authorities need to continue to make efforts to strengthen business environment in Pakistan as there is considerable room for improvement. About the achievement of the programme, he said that structural reform is continuation of the programme and accomplishment was stabilisation.