The International Monetary Fund (IMF) has told the government to increase the general sales tax (GST) to 18 per cent, that would permit it to increase an extra rupee one hundred and sixty billion in new taxes.
As per the reports of local media this would be placing the Pakistan Tehreek-e-Insaf (PTI) government in a dilemma since it has vowed the IMF it would be decreasing the load of indirect taxes.
According to some sources in the Finance Ministry the IMF delegation which is on visit to Pakistan is looking for tax efforts equal to rupees one hundred and sixty billion or 0.4 per cent of gross domestic product (GDP) forming part of the detailed fiscal adjustment under the programme.
The Federal Board of Revenue (FBR) has been told by the IMF to devise a strategy for the expenditure of tax refunds and to submit it to the IMF before the policy talks concludes.
Besides the rupees one hundred and sixty billion in taxes, the IMF has proposed boosting the collection of revenue at the stage of import due to twenty-six per cent depreciation of the rupee since the month of January 2018 and pending depreciation under its programme.
The sources revealed that the combined effect of the new taxes, windfall gains and the administrative efforts from the depreciation of currency is inclined at nearly 0.9 per cent of GDP.
As per sources Pakistan has not yet returned to the demands of the IMF.
Tariq Bajwa—the Governor State Bank of Pakistan is heading the policy level talks owing to his earlier experience of holding the position of finance secretary and the chairman of FBR.
The sources told that one major demand put forward by the IMF is to increase the GST rate by at least one per cent to eighteen per cent and this would be retrieving a minimum of seventy-five to eighty billion rupees revenues annually in the remaining span of financial year 2019.
Officials shared that the IMF has asked the authorities to increase the income tax rates, however there would be little margin for intriguer in this regard as the FBR had taken out every possible avenue.