The International Monetary Fund (IMF) has proposed a significant reform for Pakistan’s tax system as part of a new loan program, suggesting that the Federal Board of Revenue (FBR) take on the responsibility of collecting provincial taxes. This proposal aims to enhance transparency in provincial expenditures and improve the efficiency of provincial tax collection.
Sources within the Ministry of Finance revealed that the IMF has called for new measures to ensure transparency in provincial expenditures, particularly for the upcoming fiscal year. The IMF recommends the digitization of both federal and provincial budgets to facilitate better management and utilization of development funds by provincial governments.
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Digitizing the budget is expected to play a crucial role in bridging the gap between revenues and expenditures. Additionally, the IMF insists that the FBR should be empowered to collect provincial taxes, citing the challenges faced by provincial authorities in fully enforcing tax collection on various services.
One major area of concern highlighted by the IMF is the lack of a mechanism for collecting agricultural income taxes by provincial governments over the past 16 years. There is growing pressure to bring the agricultural sector into the tax net, with the belief that doing so could substantially boost tax revenue.
All provincial governments are reportedly supportive of cooperating fully with the new IMF program. Digitizing the budget involves transitioning from traditional paper-based budgeting processes to digital platforms, enabling more efficient management, analysis, and presentation of budgetary information through digital tools and technologies.
