Pakistan’s finance minister says refused IMF direction to impose Rs700 billion in new taxes

ISLAMABAD: Federal Minister for Finance and Revenue Shaukat Tarin said on Friday his government defied the International Monetary Fund (IMF) by refusing to levy new taxes of Rs700 billion while preparing the newly unveiled federal budget due to their regressive nature.
Tarin presented the budget for 2022 earlier this month with a total outlay of Rs8.4 trillion ($53.93 billion) and a revenue generation target of Rs5.829 trillion.
The finance bill also announced a growth rate of 4.8 percent for the next fiscal year.
The budget was unveiled at a time when Pakistan is in conversation with the IMF as part of the sixth review of a $6 billion bailout program that started in 2019.
The revenue target, which is 23 percent higher than the current fiscal year’s expected collection rate, has been a key sticking point between the two sides, with Pakistani authorities suggesting alternative means of achieving the goal.
“I took a stand and said this [imposition of new taxes] was coercive and not going to help our economy,” the finance minister said while delivering a wind-up budget speech in the Senate.
He said the IMF dictated Pakistan to impose Rs700 billion of new taxes in the budget, including Rs150 billion in additional income tax collection, which was plainly refused.
“This is not progressive,” Tarin claimed to have told the IMF. “We will widen the tax base to increase the revenue.”
Pakistan’s GDP growth declined in the outgoing fiscal year due to tough conditions imposed by the IMF, he said, adding that the international financial institution wanted Islamabad to keep the discount rate at 13.25 percent, currency exchange rate at Rs169, and increase in the electricity and gas tariffs.
“There will be no increase in the tariffs, and we have conveyed it to the IMF since it will burden the poor and the industry,” he continued.
To increase the revenue, the minister said, the Federal Board of Revenue (FBR) has received 15 million profiles including bank accounts of those who should pay their tax but have so far been evading it.
“We will use the power to arrest as a deterrent against willful and habitual defaulters after due process [of law],” he said, adding that a third party would help identify such individuals and entities.
The finance minister said Prime Minister Imran Khan had taken bold steps to spruce up the economy by offering incentives to the housing and construction industry along with the agriculture sector.
“Now our strategy is to depend on economic growth to create new jobs and boost income levels of people,” he said. “We believe in inclusive and sustainable growth.”
The finance minister said the government was introducing changes to the country’s tax collection system that will end harassment of people by FBR officials. “But we won’t spare those who are habitual defaulters,” he said. “A three-member committee will decide to arrest tax evaders after due process.”
Listing different incentives in the budget, he said the government had withdrawn 12 withholding taxes for being regressive, including withdrawal of taxes on vehicles up to 1000 cc, medical bills and provident funds of employees, and on all food items.
“We are not charging new taxes on internet and SMS, but we will collect 75 paisa on calls over five minutes,” he said, adding the government was also offering incentives to industrial and agricultural sector to boost the national economy.
“We are spreading a network of agricultural malls across the country to end the role of middlemen who are currently earning 400 to 500 percent,” he said. “The prime minister wants to introduce e-voting to ensure transparency and we have also allocated five billion rupees for that in the budget.”

Pakistan’s finance minister says refused IMF direction to impose Rs700 billion in new taxes