ISLAMABAD: Pakistan’s top tax authority has unveiled an ambitious plan to the International Monetary Fund to bring 1.5 million new taxpayers into the net by the end of June 2024.

The blueprint of the strategy, which was shared during the technical-level discussions with IMF officials, represents a significant milestone in Pakistan’s efforts to bolster its fiscal framework, a senior tax official told Dawn on Saturday.

The technical team has engaged in multiple rounds of discussions with tax officials from the Federal Board of Revenue (FBR), focusing on the tax performance in the first quarter. The IMF representatives have expressed satisfaction with the tax collection efforts, the official revealed.

The IMF’s technical staff initiated the first evaluation of the short-term $3bn loan agreement on Nov 2, which concluded on Nov 10. The majority of the targets appear to be on track, paving the way for the release of a $710 million tranche in December.

“We have shared our projections for revenue collection in the next eight months with the IMF officials,” the official said, adding that no demand came from the Fund to take fresh tax measures.

FBR’s top officials have assured the IMF that the projected revenue collection target of Rs9.415tr for FY24 will be met without the need for any additional tax measures.

Furthermore, the official dismissed the rumours that the IMF is demanding an increase in the revenue collection target or plans to impose more taxes on traders and the real estate sector.

This assurance negates any speculation about additional taxation measures. The sectoral taxing is our internal arrangement, the official said, adding that the IMF is only concerned with overall revenue collection performance.

Numerous attempts had been made in the past to bring traders, into the tax net. However, taxing this sector ahead of the upcoming general elections on Feb 8, 2024, could prove challenging, as many traders’ unions have political affiliations.

Similarly, the FBR may face difficulties in revising tax tables for the real estate sector, which also has strong political connections. Despite these challenges, the tax official remains confident that the FBR is on track to meet the overall revenue collection target for the current fiscal year.

Broadening tax base

The official revealed that 145 offices dedicated to broadening the tax base have been established in regional tax offices (RTOs) throughout the country.

“We have data on one million potential taxpayers,” the official disclosed, adding that this data was systematically collected on individuals who have conducted substantial transactions and other activities but are not currently on the tax roll.

This data has already been shared with the RTOs across the country, the official confirmed.

The primary task of the officials working to broaden the tax base will be to identify new taxpayers, and they will not pursue existing taxpayers. This strategy underscores the government’s commitment to expanding the tax base without burdening current taxpayers.

Tax analysts have expressed a cautious outlook, stating that only time will reveal whether the Federal Board of Revenue will be successful this time in broadening the tax base.

They point out that the FBR has made similar claims in the past about having data on millions of potential taxpayers from the National Database and Registration Authority, but no significant expansion in the tax base was observed. The effectiveness of the current strategy remains to be seen.

In the tax year 2022, 4.8 million taxpayers filed their tax returns.

Published in Dawn, November 12th, 2023