Published Date: Jul 22, 2013
SDPI Press Release (July 22, 2013)
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.
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
discussing at a seminar organized by Sustainable Development Policy Institute
(SDPI) on “Pakistan Federal Budget
2013-14 and Role of IMF”.
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.
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.
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.
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.
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.
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.
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.
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.
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.