ISLAMABAD: In the wake of FBR’s revenue shortfall, the government has no other option but to take additional revenue measures through enforcement steps and hike in tax rates in the form of mini-budgets or cut down expenditures to satisfy the IMF.
Although it is not firmed up, the IMF may send its mission to Islamabad anytime in the coming weeks. Pakistani authorities say the IMF team would visit Pakistan next month (December 2024) but insiders still insist that they might prefer to come anytime soon.
An ordinance has been drafted and is likely to be presented before the federal cabinet soon. It is expected that the ordinance may be promulgated within the ongoing month. The FBR high-ups claim that the proposed ordinance might implement stringent enforcement measures such as freezing of bank accounts, banning purchase of plots, vehicles or other steps. “The FBR may propose raising withholding tax rates on all imports, hike withholding tax rates on sale and purchase of properties and some other hikes in tax rates,” top official sources confirmed while talking to The News on Saturday.
There is still an option before the economic managers to further squeeze the development budget in the shape of Public Sector Development Programme (PSDP). In the first quarter (July-September), utilisation was standing at just Rs22 billion, despite having a revised allocation of Rs1,100 billion for the whole financial year 2024-25.
The FBR faced revenue shortfall of Rs189 billion in the first four months (July-Oct) period of the current fiscal year and apprehensions were rising that the tax machinery would continue facing a shortfall in the first six months (July-Dec) period of the current fiscal year. The forecast of revenue undertaken by the FBR showed that there might be a shortfall of Rs321 billion in the first six months, leaving no other option but to consider a mini budget to align the fiscal framework with the IMF agreement.
It can be still the discretion of the government to satisfy the IMF through cutting down the expenditure but the Ministry of Finance would not be happy over any such proposal.
In a meeting was held some days ago under the Minister of State for Finance and Secretary Finance, the finance ministry bosses were upset and unhappy over the revenue forecast of tax shortfall of Rs321 billion, expected to occur in the first half of the current fiscal year. If the tax shortfall widens, then the Ministry of Finance would be forced to curtail its unbridled expenditures.
“The Pakistani team will be walking on a very tight rope because if the revenue measures in the shape of hiking tax rates get a nod, it might further shrink the economy,” said the official arguing that the demand in the economy had already suppressed and tax rates hikes would further suffocate the economic activities.
When TV channel aired the stories, the FBR spokesman stated in its official statement on Saturday that some news channels aired an absolutely baseless and false story stating that IMF had rejected the FBR’s request for revision of targets.
“It is outright denied that any such meeting had taken place with the IMF on this subject. Nor this subject has ever been on the agenda of any of the meetings, virtual or otherwise, with the IMF. Therefore, the FBR not only rejects the news but also advises the national media to refrain from such fake stories, which might affect the national interests adversely.”
