ISLAMABAD - International Monetary Fund (IMF) has reportedly shown concerns over the Prime Minister’s tax incentive scheme, as the Fund noted that scheme is supposed to undermine the goal of improving tax collection and enforcement over time.

Sources informed that policy level talks for next tranche from IMF under the extended fund facility started in Dubai on Friday. Finance Minister Senator Ishaq Dar is heading the Pakistani side and IMF team is led by Jaffery Frank, the mission head. Pakistan’s economic team has briefed the IMF mission on the current economic situation of the country.

The sources informed that Pakistan has presented its plan to broaden the tax base of the country by bringing non-taxpayers into tax base and to eliminate tax exemptions. The government briefed the Fund that Federal Board of Revenue (FBR) has prepared a strategy to eliminate tax exemptions given through SROs in next three years. Similarly, the tax department of the government is working to bring non-taxpayers into the tax net, as it has already issued notices to some 60,000 to 70,000 non-taxpayers.

Later, the government would start take action against those non-taxpayers to who issues are issued but they did not pay taxes. The sources informed that the government also briefed the international lender on the privatization process of loss-making public sector entities. Economic team of Pakistan informed that government has initiated the process of privatization, which would generate Rs 150 billion for the national kitty during the ongoing financial year, while the process would be completed on fast tracking.

Similarly, the government has controlled the budget deficit at 2.5 per cent of the GDP during first half (July-December) of the ongoing fiscal year.

The Fund staff and the Pakistani authorities are reviewing qualitative and quantitative performance of the benchmarks agreed under the $6.64 billion programme.

Islamabad is trying to convince the Fund staff for release of the third tranche worth $545 million by March this year after approval from the Fund’s executive board.

The IMF had already released two tranches worth of $1.09 billion for Pakistan under EFF. The facility amounting to Special Drawing Rights (SDR) 4.393 billion ($6.64 billion, or 425 percent of Pakistan’s quota), was approved by the Fund on September 4, 2013. The EFF is a 3-year arrangement for Pakistan by the IMF to support the country’s economic reform programme to promote inclusive growth.