Mobilising domestic tax revenue is key element of IMF's Pakistan programme: spokesperson

Tahir Sherani Published September 13, 2019

International Monetary Fund (IMF) spokesperson Gerry Rice addresses a press briefing on Thursday. — Photo courtesy Gerry Rice Twitter

International Monetary Fund (IMF) spokesperson Gerry Rice on Thursday said that one of the key elements of the IMF programme in Pakistan was the need to mobilise domestic tax revenue to fund the "much needed" social and development spending while placing debt on a "firm downward trend".

The IMF executive board on July 3 had approved a $6 billion bailout package for Pakistan.

While addressing a press briefing in Washington, in response to a question regarding whether Pakistan could be advised to cut subsidies and development spending to keep the primary deficit in line, Rice said that IMF Managing Director David Lipton had also emphasised the need to mobilise domestic tax revenue in an earlier meeting with Prime Minister Imran Khan.

Read: 'Pakistan needs to mobilise tax revenue, cut debt': IMF acting director after meeting PM

"Let me add that we expect an IMF team to be in Pakistan in the next few days, including our director for that area, Jihad Azur will be there," Rice added.

On September 6, the finance ministry issued a statement in which they said misunderstandings had emerged in the media around the scheduled visits of IMF Middle East and Central Asia Director Jihad Azour and a technical team over the next couple of weeks.

It had said the ministry would meet next week with Azour and apprise him on the results achieved so far. "However, this is not an IMF review mission as certain segments of the media have suggested."

Azour's visit was planned for September soon after the finalisation of the Extended Fund Facility programme.

The government also said that its reform agenda signed with IMF was on track and the progress so far on nearly all the performance and structural benchmarks for the first quarter of the current fiscal year were very encouraging with a strong indication that all the targets would be met.

The finance ministry was reportedly compelled to issue the statement after there were certain media reports about programme renegotiation owing to major fiscal slippages on the conclusion of fiscal year 2018-19. The ministry said it believed the "targets under IMF programme are ambitious, there is no need to renegotiate".

IMF technical levels talks are expected to be held at a later stage after completion of the first quarter of the year and will provide both teams with the opportunity to review progress made to date, the ministry added.

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Comments (12) Closed

M. Saeed

Sep 13, 2019 12:21pm

How could IMF loan place our debt on a "firm downward trend", when it has reduced the revenue by 65% and increased the loan and interest burden of all loans by over 65%, just by fixing the exchange rate at its present value? Practically, IMF loan is a perfect recipe for killing the economy of a country for indefinite period.

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Hamed A. Jarwar

Sep 13, 2019 12:49pm

Most countries that cannot collect enough money in income taxes will tax imports.

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Vin

Sep 13, 2019 01:45pm

Many IMF programs have invariably led to failures around the world. Need to carefully evaluate it again and resist pressures for steep cuts in subsidies etc

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HMVoice

Sep 13, 2019 02:46pm

Sir. Our defacto Finance Minister Hafeez and SBP Governor Baqir are your colleagues. They will do exactly as you instruct. It may devastate our economy but they will make you proud!

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Javed

Sep 13, 2019 03:13pm

IMF or not, it is a well established fact that no nation can TAX itself out of poverty.

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Javed

Sep 13, 2019 03:17pm

@Vin, subsidies should be eliminated, and tax rates should be cut in half to encourage a broader tax base.

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Roy

Sep 13, 2019 04:47pm

In the past few years approval of IMF loans are considered to be an achievement for the politicians. That says a lot about the situation of the country.

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Enlightened One

Sep 13, 2019 06:13pm

The IMF Chief is absolutely right. Pakistan has to collect income tax from its own citizens and its own companies internally to pay off its debts and balance the budget. What does that mean? Very easy. Make a list of the top 100 companies (by revenues) in Pakistan. Sort them by descending order. Then find out how much income tax they paid every year in the past 5 years. Then calculate actual tax payable by multiplying the net income before tax by 35% and make them pay that amount for each one of the past 5 years. Then, make a list of the top 3 families in Pakistan, and make a family tree, going up to 5 levels of span for each member - Sharifs, Zardari/Bhutto/Talpur, and Malik Riaz. For every single family member of these 3 families, ask them to produce a list of every single movable and immovable property they own, in their names and benami, and the incomes earned by every one of them for the past 5 years. Tax the income at 35%, and properties at 1% of their market values. Windfall tax

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S. Nasheed Ahmed

Sep 13, 2019 06:13pm

The PTI Government's economic plan / current IMF program is a disaster. Development budget has been cut down drastically with no serious reduction in administrative expenditure. The supervisory & regulatory machinery is in overdrive. Investor confidence is zero. Business houses are down-sizing or closing down. Purchasing power has plummeted so market demand is falling. If there is no income, who will pay income tax ? Exports have not increased because this is not much a simple formula. Decline in imports is not necessarily a good thing as several import-based industries will be affected and millions of ordinary dependent consumers will suffer. Will be real PM please stand up ?

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Ash Man

Sep 13, 2019 08:12pm

For every dollar the imf gives in loans it wants 10 dollars in taxes from local people.

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Please explain

Sep 14, 2019 01:21am

@M. Saeed, India also depreciated its currency by over 50% in 1991 and that did not kill the Indian economy. It depends on the stewardship of the economy. Separately, how did you come up with 65% devaluation of the currency? It was 128 to the dollar in July 2018 when talks with IMF had not even started. Finally, IMF looks at all numbers and ratios in Pakistani rupees so your claim that revenue would reduce by the level to which currenxy depreciated is quite incorrect. Rupee depreciation would have no impact on revenues in the budget.

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Please explain

Sep 14, 2019 01:25am

@Vin, IMF programs in South Korea, Thailand and Indua in the 1990s were very successful. Bangladesh economy too emerged strongly from an IMF program. IMF does not dictate that you should cut subsidies. It simply mandates the level of primary deficit. Pakistan can reach that through higher taxes or cutting other heads such as defense to allow subsidies. The choice is Pakistsn’s To make. However any lender will attach conditions to a loan. Only way of mot agreeing to the condition is to not avail the loan.

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