IMF urges fairer taxation system, broadening of tax base in Pakistan

The International Monetary Fund (IMF) has stressed the need of a fairer taxation system in Pakistan with participation of all sectors.

The IMF’s Executive Board in a statement on Saturday emphasized for “sustained implementation” of the new $7 billion bailout package, as well as broadening of the tax base, following its approval of the 37-month Extended Fund Facility (EFF) for Pakistan, under which it has disbursed a $1bn tranche.

The government has agreed to the unpopular reforms, including widening its chronically low tax base.

“The IMF stressed the importance of additional revenue mobilisation efforts by broadening the tax base and enhancing tax administration.”

The IMF has urged for strict implementation of the anti-money laundering framework, curbing corruption in government departments and power sector reforms.

The IMF also stressed the need of better governance in government departments and persistent reform. It has urged for reforms in energy sector and timely adjustment of power prices.

The lending institution has said that the businesses required equal opportunities and productivity of all sectors.

The IMF board highlighted the new program would “require sound policies and reforms to support the ongoing efforts to strengthen macroeconomic stability, address deep structural challenges, and create conditions for a stronger, more inclusive, and resilient growth”.

The IMF board noted, “despite progress, Pakistan’s vulnerabilities and structural challenges remain formidable”.

“A difficult business environment, weak governance, and an outsized role of the state hinder investment, which remains very low compared to peers, while the tax base remains too narrow to ensure tax fairness, fiscal sustainability and meet Pakistan’s large social and development spending needs.

“In particular, spending on health and education has been insufficient to tackle persistent poverty, and inadequate infrastructure investment”.