According to newspaper reports, the country could not meet the tax collection target allegedly set by the International Monetary Fund as the tax authority is facing a shortfall of Rs 40 billion tax in the first quarter of the current fiscal year. The compliance of the IMF conditionalities is one thing but collection and payment of tax as a national duty is something else which has its own parameters. The prevailing tax system is almost obsolete and needs structural reforms. Finance Minister Ishaq Dar has acknowledged the need for introducing reforms in the system after he was briefed that the Federal Board of Revenue faces Rs 40 billion shortfalls in tax collection. Now the government is considering levying tax on luxury commodities used by rich to save poor and middle classes from additional taxes. According to the minister, negotiations between Pakistan and IMF for the 9th tranche review under Extended Facility Fund have been completed while Pakistan will also receive a $500 million tranche from the World Bank this month.
The government had increased the development budget from Rs 316 billion to Rs 700 billion during the current financial year and it has to meet the targets to avoid cut in development funds. Dar claimed the credit of the economic stability in first two years of the Pakistan Muslim League-Nawaz government. The country’s foreign exchange reserves have been increased, a significant progress is made in energy sector and the world donor agencies have acknowledged the progress made in various other sectors. The government has achieved GDP growth rate of 4.5 percent and is likely to increase it to 5.5 percent during the current fiscal year. Dar also revealed that the government obtained the IMF to clear the old loans. The country received $4.6 billion and returned $ 4.7 billion, leaving the people to guess the jugglery of words and figures.
The only way to achieve economic stability and prosperity is to focus on tax reforms for which the government seems not in a hurry. The government had initiated various power generation projects to overcome shortage of electricity but energy crisis still persist. The direct and indirect taxes as well as the federal and provincial taxes have severely affected the quality of life of the middle classes. The government has a majority in the National Assembly and nobody can stop it from the packages of legislation to overhaul the financial, energy and social sectors. Dar also accepts that circular debt has increased due to lack of energy reforms, but question is who is stopping the government from introducing reforms at the first place? It is time to leave petty politics to do something real.
