Pakistan will introduce new amendments to Anti Money Laundering (AML) Act within the ongoing month to cover additional important tax crimes.

“The scope of tax crimes in the Schedule of Offenses is limited. To increase the scope, we will introduce new amendments to parliament to cover additional important tax crimes, by January 2016, for enactment by end-May 2016,” Pakistan informed the International Monetary Fund.

The Parliament last year approved the AML bill with some amendments including bringing two sales tax and one federal excise duty offenses into ambit of AML. The opposition parties in the Senate forced the government not to include income tax offences into ambit of AML as was desired by the government. The Senate significantly limited the scope of tax crimes in the Schedule of Offenses.

“We will continue strengthening the effectiveness of the AML/CFT framework in line with international standards. We will also continue to bolster the Financial Monitoring Unit’s analytical capability and strengthen the effective implementation of the relevant United Nations Security Council Resolutions”, Pakistan stated. Adopting amendments to the AML Act to include serious tax crimes and implementing measures targeting the laundering of proceeds of tax crimes will also allow better detection and deterrence of tax evasion.

Pakistan has also informed the Fund about the constitution of new National Finance Commission (NFC) award, revenue sharing formula between center and provinces. “In the new round of NFC negotiations, we will seek an agreement to balance devolution of revenue and expenditure responsibilities in a way that allows for macroeconomic stability,” the government stated.

The federal government will encourage provinces to improve provincial revenue collection by modernizing agriculture taxation and improving taxpayer compliance with a particular focus on identifying mis-declarations in this area. In January 2016, govt will start working closely with provincial governments to establish a centralized electronic fiscal cadastre to better record transactions and assess real estate tax for each property based on periodically updated market valuation.

Pakistan’s program financing needs (estimated at $7.2 billion or 3.2 percent of GDP) are fully covered for the current fiscal year. Disbursements from multilateral and bilateral partners (including about $2.6 billion from the World Bank and the ADB) are expected to cover most of the financing needs. Pakistan has access to international markets, which reduces financing risks going forward.

Pakistan’s capacity to repay the Fund has been strengthened by supportive policies, improved foreign exchange buffers on the back of strong remittances and low oil prices, and a lower budget deficit. However, the materialization of risks to the economic outlook could erode these gains, particularly in the context of the Fund’s exposure increasing further with new EFF program disbursements.

Pakistan has also sought the Fund’s advice on options to strengthen the Fiscal Responsibility and Debt Limitation (FRDL) Act in terms of operational and procedural aspects, such as an appropriate fiscal policy anchor, medium-term orientation of the budget process, and policy coordination across all layers of government.

To increase the number of active taxpayers, Pakistan informed the Fund it introduced a variety of measures that are yielding some results. With this, the number of personal income tax (PIT) filers has increased by more than 200,000 over the last two years. Nevertheless, at around 970,000 as of end-November, the number of active PIT filers is still significantly below the estimated 5.7 million potential taxpayers and the number of corporate income tax (CIT) filers is less than one percent of all commercial and industrial electricity users.

The authorities plan to continue reducing the backlog of GST refund claims to a level consistent with a three-month flow (or about PRs 20 billion) from PRs 87 billion in September 2015.