Removal of tax breaks to help raise tax revenue by 0.3% of GDP; IMF lauds Pakistan’s improving taxation system

ISLAMABAD: The International Monetary Fund (IMF) has given the new tranche to Pakistan over the country’s better taxation system.

The IMF has issued a statement confirming that it has released a new tranche of the support loan for Pakistan, as the country has been deemed as making solid progress of boosting tax revenues. However, it said that there is still vast room for improvement for the country with one of the worst tax-to-GDP ratios in the world.

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The IMF experts said that since the start of the current financial year, the government of Pakistan has revoked several Statutory Regulatory Orders (SROs), which have previously been used to grant unjustified tax exemptions and tax breaks.

The SROs have previously been criticised as for being biased, unfairly benefiting groups with political connections. It is estimated that removing the tax breaks will help raise tax revenues by an equivalent of approximately 0.3 percent of the national GDP. It is expected that the government will announce the drop of even more SROs, a move expected to boost tax collections even further.