Govt says no to mini-budget idea — for now

ISLAMABAD: Differences have emerged between the International Monetary Fund (IMF) and Pakistani negotiators over fiscal numbers.

The government, however, is so far resisting taking any additional taxation measures through the mini budget for the remaining period of the current fiscal year.

The budget deficit target might revise downward but the IMF has been asking the Pakistani authorities to ensure clinching of the primary surplus envisaged for the current fiscal year.

The IMF has come down hard on Punjab’s fiscal position on account of its inability to generate desired revenues and curtailing unbridled expenditures.

During the discussion, it also came on the table that the Federal Board of Revenue (FBR) should be granted powers to collect taxes in Punjab and then handover to the most populace province of the country after deducting its collection charges.

The IMF wants improved fiscal federalism and proposed revision of the NFC Award with consent of the Center and provinces on medium-term basis.

For time being, the IMF wants full implementation through improved coordination with the provinces, including through updated Memorandum of Understanding (MoUs) with the federal government that might help guarantee their FY24 budget targets.

The Punjab government had committed, through its MoU, to curtail its expenditure by Rs115 billion for the remaining period of current fiscal to achieve the committed surplus associated with the FY24 budget. The provincial governments have agreed to rectify the decade-long accumulation of commodity debts (created by provincial food departments outside the government’s fiscal perimeter) by implementing time-bound plans for the timely retirement of this debt.

However, the IMF has demanded for unveiling simplified tax scheme for retailers but Minister for Finance Aurangzeb had to rush for attending another important meeting at the last moment. He could not join the IMF meeting on fiscal front held here on Friday. So, he would have to share the government’s intentions on proposed retailers’ scheme for which the government had already secured powers in the tax law in the last budget for 2024. This scheme does not require any legislative approval of Parliament but the PMLN-led regime seems reluctant to slap tax on its political constituency belonging to shopkeepers.

The IMF showed different projections for the last four months (March to June) which they claimed that these were shared by the Ministry of Finance. However, the FBR explained that they would achieve the annual tax collection target of Rs9,415 billion, so there was no need of any mini budget.

After hectic debate, the IMF asked the FBR to share their monthly target well on time, and if need arises, they will recommend additional taxation measures. The IMF made it mandatory for the FBR to share April’s collection with the Fund till May 3, 2024.

The IMF reminded the FBR high-ups that the revenue collector should make plans to launch a scheme for door-to-door campaign in four provincial capitals and Islamabad, to register non-filing retailers and streamline their tax filing.

By cross-referencing tax filings with electricity meter data, the FBR aims at detecting evasion and conduct audits when required.

The FBR plans to implement safeguards in the form of strict supervision through random audits of assessments filed under the scheme to verify correctness of valuations and payments. The FBR intends to launch this scheme with least discretion for the field offices to alter valuations and assessments to protect the potential revenue raised from these actions.

To avoid double taxation, monthly advance tax payments under the scheme will offset final income tax liabilities at year-end at the time of return filing, but no refunds of such advance payments of taxes will be issued. Moreover, the FBR committed with the IMF to provide timely monthly data on agreed performance indicators.

On Non- Tax Revenue (NTR) target, there was a discrepancy on the projections made by the IMF and Ministry of Finance as huge gap existed in this regard. The IMF also dwelt upon exceeding expenditures side that witnessed ballooning trends, including hike in debt servicing bill, due to which the agreed budget deficit target of the federal government might be revised upward going close to 7.9 percent of GDP.