The International Monetary Fund (IMF) has not accepted Pakistan's request to review downward the Federal Board of Revenue (FBR) tax collection target of Rs 5.5 trillion, which was described as unrealistic and ambitious by many independent economists soon after it had been announced.
This was disclosed by Chairman FBR Shabbar Zaidi while taking to media persons after the meeting of Senate Standing Committee on Finance on Monday. However, he added that negotiations with the IMF are being held and "we would try to convince them on a downward revision of the FBR's target for 2019-20."
Sources said the FBR tax collection base was eroded by Rs 318 billion as tax target of Rs 5.5 trillion was based on projection of Rs 4,150 billion for the last fiscal year; however, the actual collection was Rs 3,830 billion. There were also reports that FBR has asked the IMF for a downward revision of its tax collection target by Rs 233 billion to bring it to Rs 5,328 billion.
Replying to questions, he said the FBR has revised the timelines for implementation of reforms under ongoing restructuring of the FBR and only deferred the decision to constitute the proposed Pakistan Revenue Authority (PRA). He said the FBR will not compromise on the government's decision of re-organization and restructuring of the tax machinery. The reform process in the FBR has not been stopped. "We have constituted a seven-member steering committee on the restructuring of FBR," he added.
Earlier, Senate Standing Committee on Finance chaired by Farooq Hamid Naek was informed that FBR has collected Rs 1,280 billion against a target of Rs 1,447 billion, which is 16.3 percent higher than the previous year's collection during the same period.
Discussing details of increase in the number of taxpayers in the current financial year, the committee was informed that an increase of 65.2 percent was observed vis-a-vis the corresponding period of last year.
The committee was also informed that out of 2,655,081 return filers, 888,748 are new taxpayers. The number of individuals that availed Asset Declaration Ordinance 2019 was 124,208. Tax payment of Rs 4.7 billion under the present scheme was also observed.
The committee also considered the agenda items with regard to smuggling of LED TVs referred by the chairman Senate, briefing on details of non-performing loans and reasons for increase since July 2018, steps taken to get Pakistan out of the FATF Grey List and details of tax collection during 2019-20, increase in the number of taxpayers and the sums of money recovered.
While discussing the details of smuggling of LED TVs, the committee was informed that the ongoing momentum of countrywide enforcement operations against smuggling of goods including LED TVs is in full swing. These measures have been geared up by an increase of 40 percent during FY 2019-20 when compared to previous financial years. The main challenge found by the agency has been a ban on recruitment which has now been removed. The meeting was told that the smuggling of LED and electronic items has increased during the current fiscal year and cited lack of manpower and absence of capacity building as major reasons for this as total items smuggled during the last year were of Rs 6.3 billion which have increased to Rs 11 billion so far. The meeting was also informed that a national anti-smuggling policy would soon be introduced as the Prime Minister is very serious about the smuggling issue. The committee members, however, did not agree to the excuses of tax authorities for increase in smuggling and some members contended their stance on lack of manpower and capacity building and stated that they have been hearing this excuse for long. The committee stressed the need for training of forces that have been granted anti-smuggling powers such as the Coast Guards and Frontier Corps. Reviewing whether increases in taxes and duties have contributed to a rise in smuggling of goods, the committee was informed that there is no tax on raw material import and the measure has been taken for industrialization. On non-performing loans, the committee was informed by the State Bank of Pakistan officials that reason for increase in non-performing loans on June 2019 as opposed to June 2018 included pending casse in the court as well industrial loans including energy sector, sugar, agribusiness as well as individuals and other. Energy sector loans increased to Rs 85 billion in June 2019 from Rs 36 billion in June 2018, agribusiness to Rs 71 billion from Rs 64 billion, sugar NPL to Rs 45.5 billion from Rs 36 billion and others increased to Rs 621 billion from Rs 275 billion.
On the issue of FATF, the committee was informed that Pakistan is committed to aligning the country with global financial system to make Pakistan as a reliable partner in countering global ML/TF challenges. Towards this end, Pakistan has formalized Internal Action Plan to revamp legal regulatory and supervising framework. It was asserted that legislative re-vamp in banking and financial systems, institutional reorganization and capacity building, addressing enforcement of e-governance and financial challenges, autonomy of regulatory framework and regimes would ensure permanency of newly raised structures.
In addition to this, Pakistan seeks to revamp the entire AML/CFT regime. According to FATF assessment, Pakistan has largely addressed five out of 27 action items. The meeting was attended by Senator Syed Shibli Faraz, Senator Mohsin Aziz, Senator Mian Muhammad Ateeq Shaikh, Senator Muhammad Akram and senior officers from the Ministry of Finance, Revenue and Economic Affairs, FBR, State Bank of Pakistan, and Customs of Pakistan along with all concerned.
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