ISLAMABAD: The finance ministry has admitted that it failed to achieve three targets under $7 billion of Extended Fund Facility (EFF) including indicative target of FBR’s revenue collection for the first quarter and spending on health and education.
The provincial governments missed the deadlines to amend their agriculture income tax legislation by end of October 2024. The federal finance secretary gave a detailed presentation to the National Assembly Standing Committee on Finance on quantitative performance criteria and structural benchmark of the International Monetary Fund (IMF) programme.
The committee was informed that each province was required to amend its agriculture income tax legislation and regime to fully align it with the federal personal income tax regime for small famers and federal corporate income tax regime for commercial agriculture, so that taxation can commence from January 1, 2025. Timeline for legislation was end-October 2024, which was delayed by provinces. Punjab enacted the law. In case of KP, the law has been approved by the cabinet and placement in the assembly is awaited.
The government will introduce five per cent Federal Excise Duty (FED) on pesticides and fertilisers in the next fiscal budget. The federal and provincial governments agree that some spending responsibilities from the Government of Pakistan will be devolved to the provincial governments in line with the spending allocations established in the 18th Constitutional Amendment, including, additional contributions for higher education, health, social protection, and regional public infrastructure investment. At the same time the provinces will take steps to increase Own tax-collection efforts in sales tax on services, property tax, and agricultural income tax.
According to the proposed legislation, provincial governments shall:
1. Amend the Agricultural Income Tax (AIT) regimes to fully align them, through necessary legislative changes, with Federal Personal Income (small farmers) and Corporate Income (Commercial Agriculture) tax regimes by end-October 2024 and begin taxation of agricultural income under this new regime from January 1, 2025 with collection for second half of FY 2024-25 agricultural income in July 2025.
2. Transition the services GST from a positive list to a negative list approach to combat tax evasion to take effect from the start of FY 2025-26.
3. Aim to collectively raise revenues from corporate tax in agriculture and GST on services combined with provincial tax effort in expanding additional areas of revenue collection.
4. Develop, implement and collect revenue under a common approach to property taxation.
5. implement the necessary administrative reforms to narrow the tax compliance gap, including for the GST. 6 National Tax Council terms of reference will be expanded to include the design of the relevant tax measures including property tax and the necessary legal and administrative changes to implement them.
6. Provinces shall provide additional contributions for Higher Education to the Federal Government supported initiatives of the Higher Education Commission (NEC). Federal and provincial governments shall gradually rebuild spending on health and education programs as a share of GDP.
7. The Federal Government, in consultation with provincial governments, will examine social protection programs rolled out/planned by the provincial governments and BISP respectively, to identify overlapping programs and fiscal allocations, and take fiscally prudent measures accordingly, in ways which strengthen and improve generosity and coverage of social protection.
8. Provinces will cover all of PSDP spending, which benefit solely one province and any spending by the Federal government in areas allocated to provinces in the 18th amendment as per the decision of the National Economic Council (NEC), with certain exceptions to be determined by NEC on the basis of well-defined criteria.
9. Provinces shall discontinue announcing support prices (for raw commodities) and also discontinue procurement operations.
10. Federal Government shall reduce its footprint in line with the 18th amendment.
11 If needed, matters requiring federal and provincial consensus and coordination may be referred to the forum of Council of Common Interests (CCI) or NEC.
12. The Federal and provincial governments shall implement the Electronic Pakistan Acquisition and Disposal System (e-PADS).
13. Federal and provincial governments shall adopt green budget tagging by end June 2025.
14. Provincial Anti-Corruption Establishments will coordinate with newly established AMUCFT Authority and other relevant agencies such as Financial Monitoring Unit (FMU), Federal Board of Revenue (FBR), National Accountability Bureau (NAB), etc., for implementation of national AML/CFT strategy.
15. Federal and provincial governments shall issue regulations to grant banks access to high-level provincial public officials (BPS17-22) wealth statements.
16. Provincial governments shall facilitate the expansion of the Pakistan Single Window platform to provincial departments by end-FY26.
17. Federal and provincial governments shall facilitate moving swiftly towards the complete digitalization of government payments, and promotion of digitalizing public records which would enhance access to credit by currently underserved segments of the population.
Separately, amid protests from Opposition Leader Omar Ayub against the decision to hold in-camera proceedings of the NA panel, Minister for Finance Mohammad Aurangzeb said on Monday that Pakistan had to secure the IMF programmes for 25 times, as no programme was implemented fully.
“It’s not so simple. If the IMF programme had been implemented fully, the country would not have entered into the Fund programme for 25 times,” the minister said and added that there was a coalition-led government in the country and they wanted everyone taken on board on financial matters.
He said there could be no sequential approach as it became an existential issue to tackle all problems simultaneously including the ticking population bombs, stunting growth of 40 per cent of children, learning poverty, degradation of climate, and air pollution. They will sign a 10-year country partnership strategy (CPS) with the World Bank to set four of these priorities.
National Assembly Standing Committee on Finance Chairman Naveed Qamar fully facilitated the finance ministry and treasury benches and declared to hold an in-camera detailed answer/question session related to the IMF despite stiff opposition from some other members.
NA Opposition Leader Omar Ayub strongly protested over Naveed Qamar’s declaration about the in-camera session.
Omar Ayub briefed journalists after end of the NA panel and stated that he demanded that the government include all state functionaries in the list of asset declarations just like the pattern of parliamentarians on similar declaration forms.
Earlier, Minister for Finance Mohammad Aurangzeb told the NA panel that the foreign exchange reserves would go up to fulfilling three months of import cover by the March-June period of 2025.
The international lenders and credit rating agencies, he said, conveyed a message loud and clear that Pakistan would have to stick to its course of reforms, he added.
Federal Secretary Finance Imdadullah Bosal informed the NA panel that there were 22 structural benchmarks agreed upon under the $7 billion Extended Fund Facility (EFF) of the IMF program out of which 18 were related to the federal government and State Bank of Pakistan while 4 were related to provinces.
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