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FINANCE Minister Asad Umar has reiterated that his government is now close to a deal with the IMF on a bailout package, but the growing revenue shortfalls being reported by the FBR should be a serious cause for concern for him.
As per the latest report, which builds upon similar reports that were received earlier, the FBR is headed towards a near-historic revenue shortfall of Rs450bn if the present lacklustre pace of revenue collection continues.
The shortfall is against targets set by the government itself, and not by previous administrations, so the present set of rulers cannot make the excuse that the targets were unrealistic. The slow revenue collection owes mainly to the virtual absence of a vision on the part of the present government when it comes to the crucial question of increasing the tax base.
It has been pointed out before, and it bears repeating, that the effort launched by the government to serve notices on high-net-worth individuals who are either underreporting their income (in view of their visible standard of living) or are simply not filing their tax returns, is a good exercise to encourage compliance, but it can never be considered a revenue-generating measure.
Such exercises have been going on for over 10 years now, but have never succeeded in raising large amounts of revenue. Other than this, the only idea the FBR seems to have for increasing revenue generation is to squeeze compliant taxpayers harder through the aggressive use of the tax body’s discretionary authority.
The backlash that this has engendered from the business community is going to eat away at whatever little goodwill the government has left.
A base-broadening exercise involves a larger vision, something akin to legislating on a Value Added Tax, or the greater and more cerebral use of the Active Taxpayer List and penalties for non-filers of tax returns.
On both these fronts, the government is either backpedalling or refusing to entertain bigger ideas. Entering an IMF programme with no vision on broadening the base of taxation will be a recipe for failure, since the programme will require a significantly ramped-up revenue effort, and without broadening the base, this will increase the burden on compliant taxpayers beyond what they are bearing today.
One-off gimmicks like a tax amnesty scheme or the sale of public assets to raise money are not the way forward and certainly no replacement for a comprehensive vision of reform.
Published in Dawn, April 15th, 2019
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Comments (36) Closed
Apr 15, 2019 08:03am
Umar must be given time to negotiate with I M F... He is no fool! Patience
Gordon D. Walker
Canada
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Apr 15, 2019 08:09am
This minister loves media and takes same subject many times in front of TV and new media. But on ground, nothing changed.
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Apr 15, 2019 08:52am
@Gordon D. Walker, SAY WHAT? Assad is total failure. Today in his statement from US, he said something different than what he said yesterday. He lives in fairyland or may be neverland. Article talks about lack of vision even if IMF provides loan. How much time do you think he needs for such vision?
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Apr 15, 2019 09:17am
Everyone wants socialism but no one wants to pay for it.
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Apr 15, 2019 09:22am
Do a demonetization on lines of India. Before that ensure to open one bank account per family . Learn from India's mistake and execute it better . Give incentives for digital payments and work towards a cashless society
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Apr 15, 2019 09:48am
Government unwilling to add wealthy Pakistani Feudals and Elites to Direct Tax Net!
No surprise there!
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Apr 15, 2019 10:13am
Yes they do. As all PTI officials repeat again and again.
They are following Imran Khan's vision.
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Apr 15, 2019 10:41am
You cannot continue to pass on the blame for all the failures to previous governments. With almost 10 months in power, there is no direction or sign of improved export, enhanced remittances or investments, no strategy to control the free-fall of economy, stock and dollar. We need to understand and accept that Asad Umer is neither an economist nor a finance professional. PTI is badly missing on capable team in any area. The rented experts and legislators are not working for them, which is not good for Pakistan. Appears all the ministers have got only one job to go after Sharif family; while this task should have been left only with a few, the rest should have been doing their core jobs !
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Apr 15, 2019 11:12am
Ask this question to Shariffs and Zardari families.
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Apr 15, 2019 11:31am
What revenue shortfall? Doesn’t the author know of the new game changer in town? The “soon to be” found huge amounts of oil and gas. After that Pakistan would be the richest and the most powerful nation on Earth. Oh how I’ve written this line so many times for so many years about the previous game changer CPEC. Let’s see how long this one lasts before a new one. Generally the hope of game changers last as long as the tenure of the government. Every new one comes up with a new game changer to keep the hopes of the people up in an otherwise extremely depressing reality.
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Apr 15, 2019 11:33am
PTI superstar Asad Umer has been a total failure of our blind judgement.
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Apr 15, 2019 11:38am
Yes , even a common literate with average know how of theoretical economics wd agree with the editorial essence. A commoner who is not educated simply use yardstick of assessment of economy n governance. He holds that unless dollar comes down , gas n power utilities billing minimised to level before PML N govt , PTI governance wd be continued to be factually termed total failure being incompetent. Their blaimegame n mudslinging on opponents particular Sharifs is firing back being tactics to divert attention f people from real issues n their failure.They all who installed them n nab misuse r equally responsible for the mayhem n damage being done to the country.
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Apr 15, 2019 12:46pm
Bangladesh 2019-20 national budget likely to be $65bn.
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Apr 15, 2019 12:48pm
@Biswajit,
They are in no position to demonetize. Their currency is getting devalued and inflation is at the highest. People will die of starvation if they demonetize. Please use your brain before giving advice.
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Apr 15, 2019 12:56pm
@Azad Insan,
SPOT ON
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Apr 15, 2019 01:17pm
We hope things will improve soon. Best wishes from across the border.
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Apr 15, 2019 02:12pm
@Gordon D. Walker, Patience how long! . He has been harping on the same set of strings ever since he took over as Finance Minister.Mean while the economic health of the country is going from bad to worse.
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Apr 15, 2019 02:20pm
Umar is bCom basic accountant who was not prepared or qualified to negotiate with IMF . Dr ashfaque khan or dr ishrat hussian should replace him so the solutions to problems can have a start
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Apr 15, 2019 02:35pm
It is definitely a tough work for the Minister to collect targeted tax with the same rusted tax machinery and same tested methods.
Don't go after people who are already paying taxes both directly and indirectly. Please chase tax collectors who failed to perform and achieve targets. Despite huge sales tax imposed, people mostly record sales in lower sides and pocketed the sale tax amount.
The Minister finance must take expert advice and come up with practical and feasible ways to enhance tax revenues. He needs to monitor his staff regularly to get the work done. Deadwood and deadbeat will just do buttering. So don't prey to them. Just demand tangible results.
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Apr 15, 2019 03:08pm
@Telephone Man, Show me a country that spends taxpayers’ money wisely without waste and corruption.
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Apr 15, 2019 04:48pm
Formalize your economy, use technology to your advantage, promote cashless transactions, every payment above Rs.10k should be done via digital payments, be it salary or paying for goods. Open bank accounts free of cost for poor people, with zero fees and charges, so they can be part of the formal economy and contribute their share. Implement labor laws so payment done for informal labor/ daily wage workers is done through banking channels. Implement property reforms so black money can be routed from the property market, a mere wealth distribution sector into wealth creation avenues like industry. India scaled back its defence budget from 2.5% of gdp to 1.5%, not hard for Pakistan to follow suit. Make government tenders for projects online, so bidding parties can bid under transparent and fair rules. Cashless transactions leave a money trail, and therefore make it hard to evade tax, horde forex, or engage in corrupt practices. Solutions are in front of you, is someone listening?
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Apr 15, 2019 05:21pm
@Gordon D. Walker, : blind faith will lend you nowhere.
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Apr 15, 2019 05:53pm
The born blind do not have even a dream of anything, not to talk of any vision.
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Apr 15, 2019 07:31pm
Army should be given the responsibility of finances.
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Apr 15, 2019 07:48pm
IMFloan will inject cash flow to help ordinary people. Once CPEC is fully operational, tax revenue will far exceed expectations and remove all deficits.
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Apr 15, 2019 07:50pm
Only little people pay taxes - former Mrs.Trump
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Apr 15, 2019 08:16pm
Must be the first nuke nation to take loans in order to pay interest on loans and debts. What an irony!
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Apr 15, 2019 09:13pm
There is no vision. Pure and simple incompetency.
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Apr 15, 2019 10:00pm
Mr FM you underestimated the task on hand before you took the responsibility.
You were not prepared nor you chalked out a plan to save the country from the various maladies facing it.
You should have known that you could not afford trial and error method for which PTI is now facing the music of high inflation and high cost of living for ordinary citizens especially those retired.
You may be honest but you failed in the task.
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Apr 15, 2019 11:01pm
Tax those who are exempted, like agriculturists. Crack down on smugglers and those selling smuggled items. FBR should secretly monitor sales of retail outlets, restaurants, etc and recover taxes accordingly. Doctors, lawyers, dentists and other professionals are among those who evade income tax. Their lifestyles should be investigated to determine whether they are cheating or not.
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Apr 15, 2019 11:04pm
The sad part is that pakistani economic advisers are all blind to the reality - "From the very beginning, I have been suggesting the PTI government to avoid going to the IMF this time, as the geo-strategic environment has altogether changed. In the past, Pakistan always stood on the right side of these powers,” said NUST's Dr Ashfaque Hasan Khan who is also the Economic Advisory Council member."
So this Ashfaque Hasan Khan (so called economic advisor) is advocating not taking IMF loans as if there are several other great chocies available!!!!
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Apr 16, 2019 03:03am
The editorial is very in postulating that the new govt. vision in revamping ageold system of revenue collection based upon “Muk Mukao” rather than modern system of value added tax & bringing the non filers into tax net. The main reason of this lackluster performance, is our finance team comprising of inexperienced & inept people. This team instead of moving more sternly & resolutely to tax such businessmen & known feudals holding vast lands, owning sugar mills & other assets,tries vainly to cut a deal with such tax evaders.
Now when ongoing IMF negotiations have put tax collection targets to PKR 5000B coupled with bringing exemption level from 1.2 M to 0.4M & that too with skyrocketing inflation, KSE sinking in quagmire of uncertain future, currency allowed to determine its own value in a jittery market, all subsidies on gas & electricity removed & its tariffs to be increased, one gets bewildered to visualize that how this razor thin majority govt. will implement such a Herculean job.
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Apr 16, 2019 03:24am
@Azad Insan, well said. Country’s economic ship is in real turbulent waters & the captain at stern, lack competency & knowhow to take it out. In a real time analysis, professionally speaking, our finance team fixed wrong priorities from the very beginning. True that they inherited a mess created by their predecessors but instead of creating a long term roadmap to recovery, the nation was misled through Quixotic pursuits of laundered money supposedly in Billions $ & got $1.2M, sold vehicles, collected dole from friends, spend time to comeout with 2 cosmetic mini budgets etc. The end result of this going cluelessly in circles ended with a shortfall of PKR 450 billions in revenue collection targets fixed in their cosmetic budget.
Now back to IMF as last resort, which should have been much earlier, we are made to accept most stringent conditions, which by all means will bring bitingly hard financial impact on poor & low income group, & one doesn’t know how this will ever be implemented.
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Apr 17, 2019 08:51am
To put it in a perspective, the anticipated revenue shortfall as reported in the story is almost 40 to 50% of the package being discussed with IMF. I am sure IMF too would be aware of this issue and this could even delay finalization of the IMF package. In a nutshell, we have not seen any major reforms roadmap from this government. I am sure eight months are sufficient to have a roadmap to tide over a crisis, the first draft at the least. To me it looks that the past eight months have been wasted in short term solutions.
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Apr 17, 2019 04:09pm
@AD, One Day adventure were done with previous governments not this one. It is good that they are following procedures and improving on their mistakes.
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Apr 18, 2019 07:51am
Asad Umar’ poor fellow is still think he can run country the way he worked for a private company. He increased excise duty 10% on locally manufacturing cars. He still believe investors from other countries will come to country where no technical persons are in Cabnet.
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