- The IMF mission is in Islamabad from November 11 to 15.
- Finance Secretary, FBR chief begin first session with IMF.
- Revealing a mini-budget is a more viable option: official.
ISLAMABAD: Finance Minister Mohammad Aurangzeb has initiated discussions with the International Monetary Fund (IMF), which is urging Pakistan to improve its revenue collection, as reported News Tuesday.
The publication reports that the IMF is suggesting two options: either unveil a mini-budget to plug the shortfall of 189 billion rupees or come up with a viable plan to reduce the rampant spending.
Finance Secretary Imdad Ullah Bosal and Chairman Federal Board of Revenue (FBR) Rashid Mehmood Langrial began the first session with the visiting IMF team scheduled to stay in Islamabad from November 11 to 15.
It remains to be seen how the IMF will respond, but satisfying its concerns appears to be a difficult undertaking.
The Finance Minister informed the IMF that the country’s fiscal machinery collected Rs 11 billion from retailers, wholesalers and distributors during the first quarter of the current fiscal year.
However, the much publicized Tajir Dost Scheme (TDS) has miserably failed to achieve the expected results as the tax collected through this scheme stands at just Rs 1.7 million as per the latest available figures, as against the The agreed target of 10 billion rupees for the first quarter. .
A senior official said TDS was only an instrument to bring retailers and wholesalers into the tax net but its objective was achieved as the FBR managed to collect additional Rs 11 billion from them in the first quarter thanks to the normal tax regime.
Under sections 236G and 236H of the Income Tax Act, the FBR has increased the tax rates for sale of products to non-filers by almost 10 times. So, considering the strict measures and fear factors, retailers and wholesalers preferred to enter the tax net and deposited. additional tax of Rs11 billion until September 30, 2024.
The number of filers has also increased significantly, so the process of documenting the economy has gained momentum in the country.
Under section 236G relating to advance tax on sales to distributors, resellers and wholesalers, any manufacturer or commercial importer, at the time of sale to distributors, resellers and wholesalers, must collect advance tax at the rate specified in the section XIV of part IV of the First Schedule, of the aforesaid person to whom these sales were made.
This rate is set at 2% on the gross amount of sales to distributors, traders or wholesalers other than fertilizer sales.
The credit for the tax collected under subsection (1) will be allowed in computing the tax payable by the distributor, reseller or wholesaler on taxable income for the taxation year in which the tax was collected.
Under section 236H relating to withholding tax on sales to retailers, any manufacturer, distributor, reseller, wholesaler or commercial importer at the time of sale to retailers, and any distributor or reseller to another wholesaler in respect of of the said sectors”, must collect the advance tax at the rate specified in Section XV of Part IV of the First Schedule, from the above-mentioned person to whom these sales were made.
This rate is set at 2.5% on the gross amount of sales to retailers. A credit for the tax collected under subsection (1) is allowed in computing the tax owed by the retailer on taxable income for the tax year in which the tax was collected.
Senior officials of the Energy Division briefed the IMF on the imposition of increased fixed rates for solar power on the grid, which will lead to a reduction in solarization. The energy division is seeking the IMF’s green light on this proposal.
The Fund staff mission is in the country for meetings aimed at suggesting a mid-term correction to avoid deviations from the budgetary and external framework envisaged for the current financial year.
The IMF preferred to go to Islamabad early rather than conduct the first review under the $7 billion Extended Fund Facility, mainly due to fiscal slippages in the first four months.
Some feared that if the course correction was not made immediately, the budget hole could widen further and reach irreparable levels by February-March 2025.
The IMF could not count on spending cuts which will have limited space, so the most viable option could be unveiling a mini-budget to increase the tax-to-GDP ratio to the desired level, the IMF said. responsible.