Islamabad, Sep 28: IMF urges fairer taxation system, broadening of tax base in Pakistan
In a statement on Saturday, the IMF’s Executive Board underscored the need for the “sustained implementation” of the new $7 billion bailout package, along with broadening the tax base, following the approval of the 37-month Extended Fund Facility (EFF) for Pakistan, which includes a disbursement of $1 billion.
The government has consented to unpopular reforms aimed at expanding its persistently low tax base. The IMF emphasized the significance of mobilizing additional revenue through tax base expansion and improved tax administration.
Furthermore, the IMF called for stringent enforcement of the anti-money laundering framework, efforts to combat corruption in government sectors, and reforms in the power sector.
It also stressed the necessity for improved governance and ongoing reforms across government departments, particularly in the energy sector, as well as timely adjustments to power pricing.
The IMF board noted that businesses require equal opportunities and enhanced productivity across all sectors.
It emphasized that the new program will “require sound policies and reforms to support ongoing efforts to strengthen macroeconomic stability, tackle deep structural challenges, and create conditions for stronger, more inclusive, and resilient growth.”
Despite some progress, the IMF board pointed out that Pakistan’s vulnerabilities and structural challenges remain significant.
A challenging business environment, weak governance, and an excessive state role impede investment, which is considerably lower than that of peer countries. Additionally, the tax base is too narrow to ensure tax fairness, fiscal sustainability, and meet the substantial social and development spending requirements of Pakistan.
Specifically, investments in health and education have been inadequate to address persistent poverty, along with insufficient infrastructure investment.
