ISLAMABAD - The International Monetary Fund (IMF) has asked Pakistan to improve tax collection by modernising agriculture taxation and developing electronic fiscal cadastres to improve property tax collection.

In its report, the Fund has also urged the federal government to improve taxpayers’ compliance and broaden the tax base more effectively.

However, the government has assured the Fund that it, in the context of current round of National Finance Commission (NFC) negotiations, will encourage provincial governments to speed up their own revenue mobilisation by bringing underdeveloped sectors such as agriculture, services and property into the tax net and improving taxpayer’s compliance with a particular focus on identifying mis-declarations about agricultural income.

The federal government would also seek an agreement to balance devolution of revenue and expenditure responsibilities in a way that allows for internalizing the objectives of macroeconomic stability and fiscal sustainability across all layers of the government.

“Given the extent of devolution in revenue and expenditure assignments, we are strengthening policy coordination between federal and provincial governments. To this end, we have submitted a proposal to the Council of Common Interests (CCI) for the establishment of a Fiscal Coordination Committee, comprising all provincial and federal finance secretaries. In anticipation of the CCI approval, the committee has already started functioning. It will continue to meet on quarterly basis to coordinate fiscal policy at the national level,” an official said.

The government has also told the IMF that it met its target of issuing 275,365 first notices by end-March 2016, to bring more potential taxpayers into the tax net.

This helped increase the number of taxpayers filing income tax return from 748,474 at end-April 2013 (for tax year 2011) to 1,040,897 (for tax year 2014) as of end-April 2016.

The government further said that it would strengthen the Fiscal Responsibility and Debt Limitation (FRDL) Act to provide better policy guidance and anchor debt sustainability.

In particular, the government has submitted the following amendments to the FRDL Act to parliament, a limit on the federal government budget deficit of 4 percent of GDP excluding foreign grants for FY 2017/18–FY 2019/20, and 3½ percent of GDP thereafter, a limit of 60 percent of GDP on public debt (as defined in the existing FRDL Act) until FY 2017/18, and, subsequently, a 15-year transition towards 50 percent of GDP and define clearly escape clauses for events such as national security and natural disasters.

The government has identified 25 companies for strategic partnerships, which will act as a catalyst in unlocking their potential through their managerial and investment participation, and can also increase the value of Government’s residual shareholding. “We will make efforts to balance the objectives of sale proceeds while adequately addressing labor market issues and social implications” it added.