KARACHI: The International Monetary Fund (IMF) has suggested Pakistan to do away with layers of tax rates and their multiple collection mechanisms, officials revealed on Saturday, encouraging the country’s economic managers to introduce uniform tax rates and establish a single collection authority since it will bring down the cost of doing business in Pakistan and reduce duplication of taxes and wasteful documentation.
Led by Ernesto Ramirez Rigo, an IMF team is currently visiting the country to conduct the first quarterly review of the implementation of fiscal policies Islamabad agreed with the Fund while availing $6 billion bailout program in July this year.
“He [Rigo] also emphasized the harmonization of tax system and creation of a single tax base as it directly impacted the ease of doing business and went a long way in creating an enabling environment for commercial activities and boosting investor confidence,” the finance ministry said in a statement issued on Friday.
Pakistan has a complex and multilayered taxation system at the federal and provincial level, requiring a great deal of documentation.
“This [IMF-proposed authority] can eliminate duplication of taxes and minimize documentation work, though the stakeholders involved in this may not understand the proposal. This will also mitigate the fears of taxpayers eventually,” Dr. Abid Qaiyum Suleri, member of the Economic Advisory Council (EAC), told Arab News.
The federal government may face resistance from provincial administrations over the implementation of the single tax collection authority mechanism.
At the moment, Pakistan has informed the visiting IMF team that the federal and provincial administrations were in a continuous dialogue to improve coordination and create harmony on issues related to fiscal and budget management, multiplicity of tax rates and reconciliation of input adjustment, the finance ministry said.
The IMF delegation head appreciated the current level of understanding between the Center and the provinces, though he also hoped it would lead to a consensus between them over a harmonized tax collection mechanism, according to the ministry.
The government has been struggling with the country’s ailing economy, which is projected to squeeze from last year’s 3.3 percent to 2.4 percent during the current fiscal year, ever since it assumed political power in August 2018.
The visiting IMF mission appreciated “good financial and fiscal management and maintenance of expenditure within the budget,” the statement said, adding that the delegation chief “stressed upon full use of development budget to achieve development goals.”
As the IMF team measures Pakistan’s economic performance against the commitments made while availing the loan program, economists say that Islamabad has almost achieved its given targets and deserves the next tranche.
“We have reduced external deficit, provided the IMF team the list of privatization entities, increased energy costs, enforced flexible exchange rate regime and given autonomy to the State Bank,” Muzamil Aslam, a senior economist, told Arab News.
“The macro economic trends have started looking better … The IMF team should be satisfied,” Dr. Suleri agreed.
IMF recommends Pakistan single tax collection authority, higher development spending
IMF recommends Pakistan single tax collection authority, higher development spending
- The Fund’s visiting delegation says the single authority will eliminate issues such as double taxation and reduce the cost of doing business
- Experts say Pakistan has achieved macroeconomic targets assigned by the IMF and deserves the next loan tranche
Sindh assembly passes resolution rejecting move to separate Karachi
- Chief Minister Shah cites constitutional safeguards against altering provincial boundaries
- Calls to separate Karachi intensified amid governance concerns after a mall fire last month
ISLAMABAD: The provincial assembly of Pakistan’s southern Sindh province on Saturday passed a resolution rejecting any move to separate Karachi, declaring its territorial integrity “non-negotiable” amid political calls to carve the city out as a separate administrative unit.
The resolution comes after fresh demands by the Muttahida Qaumi Movement (MQM) and other voices to grant Karachi provincial or federal status following governance challenges highlighted by the deadly Gul Plaza fire earlier this year that killed 80 people.
Karachi, Pakistan’s largest and most densely populated city, is the country’s main commercial hub and contributes a significant share to the national economy.
Chief Minister Syed Murad Ali Shah tabled the resolution in the assembly, condemning what he described as “divisive statements” about breaking up Sindh or detaching Karachi.
“The province that played a foundational role in the creation of Pakistan cannot allow the fragmentation of its own historic homeland,” Shah told lawmakers, adding that any attempt to divide Sindh or separate Karachi was contrary to the constitution and democratic norms.
Citing Article 239 of Pakistan’s 1973 Constitution, which requires the consent of not less than two-thirds of a provincial assembly to alter provincial boundaries, Shah said any such move could not proceed without the assembly’s approval.
“If any such move is attempted, it is this Assembly — by a two-thirds majority — that will decide,” he said.
The resolution reaffirmed that Karachi would “forever remain” an integral part of Sindh and directed the provincial government to forward the motion to the president, prime minister and parliamentary leadership for record.
Shah said the resolution was not aimed at anyone but referred to the shifting stance of MQM in the debate while warning that opposing the resolution would amount to supporting the division of Sindh.
The party has been a major political force in Karachi with a significant vote bank in the city and has frequently criticized Shah’s provincial administration over its governance of Pakistan’s largest metropolis.
Taha Ahmed Khan, a senior MQM leader, acknowledged that his party had “presented its demand openly on television channels with clear and logical arguments” to separate Karachi from Sindh.
“It is a purely constitutional debate,” he told Arab News by phone. “We are aware that the Pakistan Peoples Party, which rules the province, holds a two-thirds majority and that a new province cannot be created at this stage. But that does not mean new provinces can never be formed.”
Calls to alter Karachi’s status have periodically surfaced amid longstanding complaints over governance, infrastructure and administrative control in the megacity, though no formal proposal to redraw provincial boundaries has been introduced at the federal level.
