ISLAMABAD, April 9: The International Monetary Fund (IMF) has asked Pakistan to withdraw all tax exemptions and recover across the board tax from every potential individual and institution.
However, official sources told Dawn here on Friday that the government has refused to withdraw the 170 tax exemptions being offered under the income tax ordinance. The IMF believes that these exemptions were a "distortion" in the country's tax system.
The visiting three-member IMF review mission headed by Mr Taimur Baig were told by the senior Pakistani officials that various tax exemptions were currently being offered with the approval of the federal cabinet and the Parliament which could not be done away with immediately.
The IMF review mission was told that the government had already removed 72 tax exemptions during the last two-year period and that it was not possible to withdraw the remaining 170 tax exemptions suddenly as it could spark tension among the stakholders.
"We have told the Fund officials that there are some kind of tax exemptions which will stay forever, and therefore they cannot be withdrawn", a source said. He pointed out that exemptions being offered to Hamdard Foundation, Fatimid Foundation, Shaukat Khanum Hospital and other similar charitable institutions will continue to be offered by the government of Pakistan.
Similarly, he said that employees of the foreign organisations like IMF, World Bank, Asian Development Bank (ADB) and the United Nations were exempted from paying income tax. Also no income tax was charged from different categories of individuals. For example, PIA pilots were given tax exemption on their flying allowance.
"But the Fund officials say that if for instance a pilot is getting tax exemption on his Rs 10 flying allowance, the PIA management should increase this amount to Rs 11 and later the government should deduct Rs 1 as an income tax", an other source said.
"Then we also told the members of the IMF mission that there is now a political government in place which is constrained to offer some relief to individuals and institutions by exempting them from paying any tax", he added.
The IMF review mission was generally satisfied about other economic issues including the revenue recovery position of the Central Board of Revenue (CBR). Member Income Tax of the CBR, Wakil Ahmad Khan, told Dawn that the review mission was informed that his department has so far collected Rs 352 billion, out of a total target of Rs 510 billion, set for the current financial year.
"We now have to collect Rs 160 billion till June 30 this year and we have assured the Fund officials that we will hopefully meet that target", he said. Responding to a question, he said that the IMF wanted to strengthen the existing tax system by removing different "inroads" so as to collect more taxes from the people. "But we are gradually increasing our revenue about which IMF is being taken into confidence", the Member Income Tax of the CBR said.
