- Failed targets include FBR revenue and health and education expenditure.
- Provinces fail to change their farm tax laws before the October deadline.
- Some pending responsibilities will be transferred from federal to provincial governments.
ISLAMABAD: The Finance Ministry has admitted its failure to achieve three targets of the $7 billion Expanded Financing Facility (EFF), including the indicative target of revenue collection from the Federal Board of Revenue (FBR) for the first quarter and allowances for health and education, News reported.
Provincial governments also failed to meet the October 2024 deadline to amend their farm income tax legislation, as required by the program.
The Federal Secretary of Finance presented to the Standing Committee on Finance of the National Assembly a comprehensive presentation of the quantitative performance criteria and structural benchmarks set by the International Monetary Fund (IMF).
The committee was informed that each province must amend its farm income tax legislation and regime to fully align it with the federal personal income tax regime for small farmers and the federal corporate income tax for commercial agriculture, so that taxation can begin on January 1. , 2025.
The legislative calendar was set for the end of October 2024, which was delayed by the provinces.
Punjab enacted the law. In the case of KP, the law has been approved by the cabinet and its placement in the assembly is awaited.
The government will introduce a 5 percent federal excise duty (FED) on pesticides and fertilizers in the next fiscal budget.
The federal and provincial governments agree that certain expenditure responsibilities of the Government of Pakistan will be transferred to the provincial governments in accordance with the expenditure allocations established in the 18th Constitutional Amendment, including additional contributions for higher education, health, social welfare and regional programs. investments in public infrastructure.
At the same time, provinces will take steps to increase their own tax collection efforts on service sales taxes, property taxes and agricultural income taxes.
Under the proposed legislation, provincial governments must:
1. Modify the agricultural income tax (AIT) systems to fully align them, through necessary legislative changes, with the federal personal income (small farmers) and corporate income (commercial agriculture) tax systems by the end of October 2024 and begin taxation of agricultural income under this new regime from January 1, 2025 with collection for the second half of agricultural income for the financial year 2024-25 in July 2025.
2. Shift GST on services from a positive list approach to a negative list approach to combat tax evasion, with effect from the start of the financial year 2025-26.
3. Aim to collectively increase revenues from corporate tax in the agricultural sector and GST on services, combined with provincial tax efforts to expand other areas of revenue collection.
4. Develop, implement and collect revenue under a common approach to property taxation.
5. Implement necessary administrative reforms to reduce tax compliance gaps, including with respect to GST.
The mandate of six National Tax Councils will be expanded to include the design of relevant fiscal measures, including property tax, and the legal and administrative changes necessary for their implementation.
6. Provinces will provide additional contributions for higher education to federally supported Higher Education Commission (NEC) initiatives. Federal and provincial governments must gradually rebuild their spending on health and education programs as a proportion of GDP.
7. The Federal Government, in consultation with the provincial governments, will review the social protection programs deployed/planned by the provincial governments and the BISP respectively, to identify overlapping programs and budgetary allocations, and take fiscal measures prudent accordingly, so as to strengthen and improve. generosity and social protection coverage.
8. The provinces will cover all expenditures of the PSDP, which benefit a single province, as well as any expenditures of the federal government in the areas allocated to the provinces in the 18th Amendment in accordance with the decision of the National Economic Council (NEC), with certain exceptions to be determined. by NEC based on well-defined criteria.
9. Provinces will stop announcing support prices (for raw materials) and will also stop procurement operations.
10. The federal government will reduce its ecological footprint in accordance with the 18th Amendment.
11 If necessary, issues requiring consensus and federal and provincial coordination may be referred to the forum of the Council of Common Interests (CCI) or the CEN.
12. Federal and provincial governments will implement Pakistan Electronic Acquisition and Disposal System (e-PADS).
13. Federal and provincial governments will adopt a green budget label by the end of June 2025.
14. Provincial anti-corruption establishments will coordinate with the newly established AMUCFT Authority and other relevant agencies such as Financial Monitoring Unit (FMU), Federal Board of Revenue (FBR), National Accountability Bureau (NAB), etc., for the implementation of national AML. /CFT strategy.
15. The federal and provincial governments should issue regulations to allow banks to access the asset records of senior provincial officials (BPS17-22).
16. Provincial governments will facilitate the expansion of Pakistan Single Window platform to provincial departments by the end of FY26.
17. Federal and provincial governments must facilitate the rapid transition to the complete digitization of government payments and the promotion of the digitization of public documents, which would improve access to credit for currently underserved segments of the population.
Meanwhile, amid protests by Opposition Leader Omar Ayub against the decision to hold the NA panel’s proceedings behind closed doors, Finance Minister Mohammad Aurangzeb on Monday said Pakistan must get the IMF program for the 25th time, because no program had been fully implemented. .
“It’s not that simple. If the IMF program had been fully implemented, the country would not have participated in the Fund program 25 times,” the minister said, adding that there was a coalition-led government in the country and that they wanted everyone involved in financial matters. .
He said there could be no sequential approach as it became an existential issue to tackle all problems simultaneously, including population time bombs, stunted growth of 40 percent of children, poverty of learners, climate degradation and air pollution.
They will sign a 10-year country partnership strategy (CPS) with the World Bank to define four of these priorities.
Chairman National Assembly Standing Committee on Finance Naveed Qamar fully facilitated the work of the Ministry of Finance and Treasury and said he would hold a detailed closed-door answer/question session relating to the IMF despite the strong opposition from some other members.
Opposition NA leader Omar Ayub strongly protested Naveed Qamar’s statement regarding the closed session.
Omar Ayub briefed journalists after the NA panel ended and said he demanded that the government include all state civil servants in the list of asset declarations, just like the model of parliamentarians on similar declaration forms.
Earlier, the finance minister told the NA panel that foreign exchange reserves would reach three months of import coverage by March-June 2025.
International lenders and credit rating agencies, he said, have sent a loud and clear message that Pakistan should stick to its reform agenda, he added.
Federal Finance Secretary Imdadullah Bosal informed the NA panel that there were 22 structural benchmarks agreed under the $7 billion Expanded Financing Facility (EFF) of the IMF program.
18 of them were linked to the federal government and the State Bank of Pakistan, while four were linked to the provinces.