Going for IMF monitory support is not a bad move if it leads
to fiscal reforms, increased tax
collection and documentation
of economy, said speakers while discussing at a seminar here on Monday.

However, experts also demanded government to presents its plan of action to
ensure implementation of reforms, particularly the strengthening of tax
machinery, expansion of tax base, reduction in indirect taxes and reforms in public sector
enterprises.

They were discussing at a seminar organized by Sustainable Development Policy
Institute (SDPI) on "Pakistan
Federal Budget 2013-14 and Role of IMF".

Speaking at the occasion, economist and financial
expert, Safiya Aftab, said that
government cannot achieve revenue targets, until radical reforms and
restructuring is done in current tax administration.

"Current budget disregards the dismal performance of tax authorities who
collected Rs. 2 trillion against the target of Rs. 2.7 trillion last year. This
year budget estimates Rs 3 trillion revenue collection, but no policy framework
has been provided on how to achieve target of additional 1 trillion rupees from
last year. This is precisely why IMF in recent negotiations, was not convinced
that tax administration was amenable to reform", she added.

Safia Aftab added that current budget didn’t reflected on any major change in
policy direction from previous budgets. "The
budget moves to higher tax rate to achieve revenue targets but no
move was made to document economy through VAT. As a result, the bulk of sales
tax burden falls on the end consumer," she added. She also commented widespread
tax avoidance in Pakistan and cited figures that only 1.2 million Pakistanis
file income tax returns whereas the actual tax
payers are even less than that figure.

Analyst and media personality,
Farrukh Pittafi, said that over the years in Pakistan, IMF program was
unnecessarily criticised which ended up in a situation where governments,
especially the political governments were unable to own them. He asked
government, media and civil society to explain true narrative to ordinary
people to brings economic reforms in the country.

However, he also apprehended the role of IMF in past. He said that IMF track
record not only reflects the political decision making linking it to foreign policy, but it also tends to
conveniently overlook its own reform agenda in areas such as defence spendings
or taxing the sectors with powerful lobbies such as agriculture.

Dr Abid Qaiyum Suleri, Executive Director, SDPI said that the new IMF program
came with ‘front loading package as Pakistan failed to implement previous
commitments with IMF. "It means that Pakistan has to take fiscal and structural
reforms measure before the start of loan negotiations, and this reflected in
current budget, "he added.

"Newly introduced ‘adjustment taxes’ to document economy, increase in GST to 17
percent, gradual withdrawal of un-targeted subsidies and reforms in PSE’s and
continuation of BISP are major component of reform agenda," he went on to add.
However, Dr Suleri argued that there must be a ‘cap’ on indirect taxation and
innovative governance as keeping on regressive taxation would not serve any
more. He commented that Pakistanis are most tax paying society in a way that
that even poorest of poor who live on social protection are paying taxes leveled through indirect taxation.

On energy sector he said that although government has paid substantial amount
to end circular debt but it would further accumulate again unless we give fuel
to energy efficient plants, control distribution losses and change energy mix
for electricity production. He concluded by urging all the parties to exhibit
political wisdom and unite on agenda for common economic reforms.

Tahir Dhindsa, Editor SDPI Economic Bulletin moderated the proceedings and
maintained that Pakistan has exceeding becoming dependent on external budgetary
support including foreign aid and loans from international financial institutes
such as IMF. He said that this year’s budgetary exercise was shadowed by IMF,
whose mandatory demands for entering into fresh loan, have been embedded into
the budget.

He said that Pakistan needs monitory support and a steady growth of 3 to 5.5
percent over next few years to avoid a structural default. This demands
carrying forward the structural adjustment process to improve fiscal situation.
He also presented three major reforms to follow in short and medium term basis
that include un-interrupted supply of electricity to industrial sector, improve
revenue through direct taxation and support to manufacturing and agriculture
sector simultaneously.