Tarin told the government that it would engage in strenuous discussions with the IMF over the elimination of PIT exemptions.
ISLAMABAD: Shaukat Tarin, the Federal Minister for Finance and Revenue, says that the government will fight with the International Monetary Fund (IMF) to get rid of PIT exemptions and change tax brackets.
“We have worked hard with the IMF in the past, and we will work hard again because the wish list can’t be implemented in its entirety.”
The IMF said in its most recent evaluation report that the administration will begin processing the PIT Bill before Parliament by the end of February 2022. Previously, the IMF requested Islamabad raise Rs 160 billion via PIT changes; however, Tarin refused to adopt them during the final fiscal year 2021-22.
At the POS award ceremony, Shaukat Tarin said that Pakistan couldn’t have inclusive and long-term growth with a tax to GDP ratio of just 10% right now, which isn’t very high.
Savings rates are low and agricultural production is low-these are the causes of the absence of sustainable development.
“Pakistan has been unable to sustain long-term growth primarily due to three major factors: a low savings rate, a widening gap between exports and imports, and low agricultural productivity. He added that the government would need to increase the tax-to-GDP ratio to 20% in order to achieve more than 6% growth.
If Pakistan wants to raise more taxes, it will have to work through its problems. China’s tax-to-GDP ratio was 40%, and Turkey and Thailand also had a higher tax-to-GDP ratio, he said.
He cautioned that the government would pursue individuals who withheld general sales tax (GST) from consumers but kept the deducted money for themselves. If you don’t want to get in trouble for not giving the money to the government, he told you to put it in the national coffers.
He noted that out of a population of 220 million, only three million people filed forms, and one million filed returns just to avoid paying full withholding taxes. As a result, there are only around two million taxpayers.
‘There should be no more than two significant taxes‘
Tarin said that when he talked to Germany’s finance minister, the German minister told him that he couldn’t represent the country without money. However, he said that Pakistan’s culture was very different.
“Pakistan’s tax base was relatively small, and the nation lagged behind,” he said. There should be no more than two primary taxes: income tax and the second consumption tax, dubbed GST.
“There is no quick fix, and other taxes, like withholding taxes, must also be cut,” he said.
On the subject of the GST, he said that it should be implemented as a Value Added Tax (VAT), bringing the whole supply chain into the tax net, beginning with manufacturers, wholesalers, and retailers. Finally, clients are paid based on their use, although he conceded that the supply chain was disrupted halfway through. Retailers are not entirely compliant with taxation.
With a low tax-to-GDP ratio, a growth target of 6–8 percent cannot be met.
Now, he said, the FBR has merged tier-1 shops’ POS systems, and all consumers must get integrated legitimate receipts from them.
Retailers sold a total of Rs 20 trillion, of which only 20% of Rs 3 to Rs 4 trillion was caught, while the country’s tax-to-GDP ratio hovered at 10%.
Current expenditures in the nation are between 12 and 14% of GDP, indicating that tax receipts are insufficient to cover even basic spending needs.
He said that the country would not be able to meet its development goals if it could only pay for its current expenses with money that wasn’t taxed.
The country’s yearly growth objective of 6–8 percent cannot be met with a low tax-to-GDP ratio, he said, adding that the tax-to-GDP ratio should be raised from 10% to 20%.
He said that the FBR was on track to surpass the Rs 6 trillion milestone this fiscal year, but noted that the economy was also at Rs 60 trillion in size.
