Big rise in tax revenues as reforms kick in

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ISLAMABAD: The government, keen to show its commitment to fixing its ailing finances, on Tuesday reported a 25% rise in tax revenues since the beginning of the fiscal year due to a raft of new tax collection measures.

Pakistan has one of the lowest tax collection rates in the world and the International Monetary Fund (IMF) is watching its efforts closely. It wants the country to do more to tackle rampant tax evasion, particularly by its wealthy elite.

Any delay in implementing proposed reforms could disrupt the delivery of vital assistance from the IMF, which last month agreed that Pakistan can seek a loan package worth $6.6 billion to fix its moribund economy.

The finance ministry said new measures such as a sales tax rise to 17% from 16% had already generated $1.3 billion in revenues since the beginning of the new fiscal year in July, a 25% rise compared to a year earlier.

A finance ministry official, speaking on condition of anonymity, said the new measures were expected to generate Rs207 billion in the current fiscal year.

“In the first month of the fiscal year, the increase ascribed to the new taxes would be roughly Rs10 billion,” the official said.

“The rest can be ascribed to better assessments, plugging of leakages and better supervision and management.”

“The government had decided to bring 0.5 million new taxpayers into the tax net,” Finance Minister Ishaq Dar told reporters on Tuesday. “We have also sent 10,935 notices to taxpayers last month.”

The new government has already made steps towards reforms, setting an ambitious budget deficit target of 6.3% for 2013-14, which most analysts say might be hard to meet.

“We realise the consequences of a failure to implement tax reform,” said the ministry official. “We are working on a war-footing.”

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