- The IMF mission will visit Islamabad from November 11 to 15.
- The Minister of Finance and the Chairman of the Federal Reserve begin the first session with the International Monetary Fund.
- A mini-budget reveal is a more viable option: formal.
ISLAMABAD: Finance Minister Muhammad Aurangzeb has begun discussions with the International Monetary Fund, which is urging Pakistan to boost its revenue collection, Bloomberg News reported. News Tuesday.
The IMF is proposing two options – either unveil a mini-budget to meet the Rs 189 billion revenue shortfall or come up with a workable plan to reduce runaway expenditures, the publication reported.
Finance Minister Imdadullah Bhosale and Federal Revenue Bureau Chief Rashid Mehmood Langreal kicked off the first session with the visiting IMF team scheduled to remain in Islamabad from November 11 to 15.
It remains to be seen how the IMF will respond, but satisfying the IMF’s concerns appears to be a difficult task.
The Finance Minister informed the IMF that the country’s tax mechanism collected Rs 11 billion from retailers, wholesalers and distributors in the first quarter of the current fiscal year.
However, the much-publicised Tajir Dost (TDS) scheme has miserably failed to get the desired results as taxes collected through the scheme are only Rs 1.7 lakh crore as per the latest available figures against the agreed target of Rs 10 lakh crore for the first quarter. .
A senior official said the TDS was just a tool to bring retailers and wholesalers into the tax net but its goal was achieved as the FBR was able to collect an additional Rs 11 billion from them in the first quarter through the regular tax regime.
Under Sections 236G and 236H of the Income Tax Act, FBR raised the tax rates on sale of products to non-applicants by nearly 10 times, so keeping in mind the stringent measures and fear factors, retailers and wholesalers preferred to net and deposit the tax. Additional tax of Rs 11 billion until September 30, 2024.
The number of applicants for return has also increased significantly, so the process of economic documentation has gained momentum in the country.
Under Article 236G relating to advance tax on sales to distributors, dealers and wholesalers, every manufacturer or commercial importer must, at the time of sale to distributors, dealers and wholesalers, collect advance tax at the rate specified in Section Fourteen of Part Four of the First Schedule from the said person to whom this is made. Sales.
This rate is set at 2% on the total sale amount to distributors, traders, or wholesalers other than the sale of fertilizers.
The tax collected under Clause (1) is allowed to be deducted in calculating the tax due from the distributor, dealer, or wholesaler on the taxable income for the tax year in which the tax was collected.
Under Article 236H relating to the advance tax on sales to retailers, every manufacturer, distributor, trader, wholesaler or commercial importer must, at the time of sale to retailers, and every distributor or trader to another wholesaler in relation to the aforementioned sectors, collect the advance tax at the rate specified in Section Fifteen of Part Four of the First Schedule, from the aforementioned person to whom these sales were made.
This rate is set at 2.5% on the total sales volume of retailers. The tax collected under clause (1) is allowed to be deducted in calculating the tax payable by the retailer on the taxable income for the tax year in which the tax was collected.
Senior officials in the energy department briefed the IMF on imposing increased fixed rates for solar power on the grid which will reduce the use of solar energy. The Energy Department is seeking the green light from the IMF on this proposal.
The Fund’s staff mission is in the country to hold meetings to propose course correction midway to avoid deviations from the financial and external framework envisaged for the current fiscal year.
The IMF preferred to visit Islamabad before conducting the first review under the $7 billion Extended Fund Facility, mainly due to financial defaults in the first four months.
There were concerns that if the course was not corrected immediately, the fiscal gap could widen further and reach irreparable levels by February-March 2025.
The official said that the IMF may not rely on reducing spending heads that will have limited space, so the most viable option may be to unveil a mini-budget to raise the tax-to-GDP ratio to the desired level.