Finance Minister Shaukat Tarin said on Thursday that the International Monetary Fund’s conditions to raise electricity prices and impose 150 billion rupees in taxes on the working class constitute a “red line” for Pakistan, saying talks with the global lender could be protracted.
“The IMF has called for an increase in personal income tax and electricity tariffs, but we cannot impose an additional burden on the poor and the working class,” the finance minister said in response to a question on the state of the ongoing Pakistan-IMF talks. for two weeks.
âRaising the tax burden on the working class and raising tariffs for the poor on IMF demands is a red line for Pakistan,â Tarin said at the launching ceremony of the Pakistan Economic Survey 2020-21.
Tarin’s comments came the day the Express Tribune ran an article that the IMF showed no flexibility in its personal income tax requirement. The inconclusive talks could overshadow the budget presentation as Pakistan is in dire need of loans from the IMF and other international creditors.
The minister said the IMF had asked Pakistan to impose an additional 150 billion rupees in personal income tax. The working class pays 113 billion rupees a year in income tax, he added.
The IMF is pushing to increase electricity prices, but the prime minister has said there will be no tariff increase, Tarin said.
“If no consensus is reached within a day or two, the IMF Executive Board meeting to approve the sixth program review could be postponed until August,” the finance minister said after the conference. hurry.
According to the original schedule, the Pakistan case is expected to be referred to the committee next month.
Pakistan has already raised the annual base tariff by 1.95 rupees per unit in March to qualify for the $ 500 million loan tranche in addition to raising prices under the quarterly tariff adjustment mechanism.
The IMF is holding talks as part of the sixth review of the $ 6 billion three-year bailout package that was originally scheduled to end on Thursday. Discussions took place to obtain IMF approval for the next budget and an agreement for the sixth review (January-March period).
The successful conclusion of the talks will pave the way for the approval of a loan tranche of more than $ 1 billion by the IMF Executive Board.
The IMF is using a “cookie cutter” approach, which was not acceptable, Tarin said.
He argued that Pakistan and the IMF had the same goal of “sustainable growth”, but the difference was only on the method of achieving it.
Lily Finance Minister Tarin denies taking advantage of US military ties to win IMF favor
“We have agreed to increase tax collection to 5.8 trillion rupees next year from 4.7 trillion rupees this year, but we want to do it our way,” he added.
The Express Tribune reported that Pakistan had offered the IMF to collect Rs 242 billion through administrative measures, but the IMF was unwilling to accept it.
When asked about the poor quality of revenue collection, which relied heavily on indirect taxes, the minister said he agreed with this assessment but that all nations initially relied on indirect means of taxation .
Our long-term goal is to have progressive taxation through income tax and sales tax and all withholding taxes and turnover taxes will be abolished, the finance minister said .
“I will broaden the tax base and from next year there will be a self-assessment by the taxpayers and the RBF will not serve a tax audit notice,” the minister said. Only 3% to 4% of cases will be selected for an audit which will be carried out by a third party instead of the RBF, he added.
âThe self-assessment by the taxpayers will begin and the RBF harassment will end from the next fiscal year. “
Tarin warned, however, that voluntary non-filers of tax returns would be thrown behind bars.
The global agency has asked Pakistan to increase income tax and tariffs, however, “we cannot increase both,” he said, adding that talks with the IMF were ongoing.
The finance minister also refuted the Financial Times article, which quoted him as saying that Pakistan was using its cooperation with the US military to secure concessions from the IMF.
âLet me clarifyâ¦ it was a one hour interview based on some 19 points, and there was only one mention of the United States in which the interviewer asked about Pakistan relations. with America, to which I replied that the United States has allocated an amount for our military training.
In addition, they have not reserved any other allowance and we do not want any, âhe explained, in response to a question after presenting the Pakistan Economic Survey 2020-21.
The Financial Times, in its article, quoted Tarin as saying that military cooperation with the United States on the US withdrawal from Afghanistan had given Imran Khan’s government “some space” to delay unpopular IMF reforms.
The minister said the interviewer had also asked him about the state of play of negotiations between Pakistan and the IMF, saying: “Even in this response, I made no mention of the United States.” .
He reiterated that the post “tried to tie this point with another story and we are releasing his rebuttal today.”
The IMF resident representative did not respond to whether the fund was acting as a foreign policy instrument of the US government.