ISLAMABAD - Pakistan has assured the International Monetary Fund (IMF) for bringing further 0.3 million people into tax net and bringing new law for improving performance of State Owned Enterprises (SOEs).
“We will pursue a substantial expansion of PIT (Personal Income Tax) base by another 300,000 persons, through the use of data on the withholding tax of businesses and identify for registration new individuals as well as use of third-party data. If required, we will also conduct physical surveys to book new individuals,” the government has stated in the documents sent to the IMF for the seventh and eighth reviews under the extended arrangement.
Pakistan has also assured the IMF for improving its revenue administration. “As of end-June 2022, we have accumulated Rs366 billion in income tax refund arrears, a 67 percent increase over the course of the fiscal year as a result of a backlog in processing refund claims. We will clear income tax arrears until the stock is reduced to Rs 225 billion, thus reversing the arrears accumulation during this fiscal year, and this will be completed by end-September 2022.”
The government said it was committed to limiting any future reoccurrence of these arrears and to improving tax administration to raise the efficiency of revenue collection and will redouble our efforts to: (1) simplify tax filing and expand e-services for taxpayers; (2) accelerate the resolution of refunds and administrative appeals; and (3) strengthen the large taxpayer office. The revenue administration priorities are: (1) developing an overarching compliance strategy and setting up a Central Risk Management Unit and a Compliance Risk Management Committee at the central level; (2) systematic identification and assessment of compliance risks; (3) adopting a more project-based approach to addressing specific high-risk areas in tax compliance; and (4) strengthening data collection and analysis. To support GST harmonization, govt has established a single filing portal in December 2021, which removes the need to file separately with five different tax administrations and simplifies administration with a single tax base, which will critically improve the ease of doing business and enhance the trust of taxpayers.
NEW LAW FOR SOES:
The government also informed the Fund that the National Assembly adopted its new SOE law in July 2022, which is now awaiting Senate approval. “In line with IMF staff recommendations and inter alia it will: (1) ensure that SOE operations are grounded on commercial footing, including by defining what constitutes a commercial SOE; and (2) regulate oversight and ownership arrangements”. In parallel, the government said it is working with ADB support to finalize further regulatory reforms by end-December 2022, including seeking cabinet adoption of an SOE ownership policy. This will help operationalise the principles of the SOE law (once enacted) into a policy that clarifies ownership arrangements and the division of roles within the federal government; and Amending SOE-dedicated acts.
