ISLAMABAD, Dec 8: The World Bank has approved a $78.5 million credit and a $24.4 million loan to support Pakistan's Tax Administration Reform Project (TARP) to be implemented in five years.
The World Bank Islamabad office in a statement issued on Wednesday said that the project was also funded by Britain's Department for International Development (DFID) with a $23 million grant. The remaining costs of the project will be funded by the government of Pakistan.
The TARP would further the reforms initiated by the government for improving the tax administration, contributing to the achievement of fiscal targets and facilitating the collection of tax revenues.
World Bank senior financial sector specialist Mudassir Khan said the reform of tax policy and administration was one of the most crucial economic reforms for any developing country.
He added that in supporting the reform of the Central Board of Revenue into a more efficient and effective revenue administration, the project would make the tax policy more equitable.
It would also bring more taxpayers into the net, reduce the number of taxes, streamline tax laws to make them taxpayer-friendly, improve tax enforcement, and put in place a tax administration system which is efficient and responsive.
The project was an initiative to redress major shortcomings in the tax administration through investment in human resource and information technology. It would also modernize collection and audit procedures, foster voluntary compliance, and strengthen the institutional framework for tax enforcement.
World Bank Country Director for Pakistan Johan Wall said the Pakistan government was committed to reforming its key financial institutions. It intended through incentives and accountability to break out from a vicious cycle of high rates, rent seeking, tax evasion and low revenues.
This would lead to a virtuous cycle of lower rates, equitable tax structures, fair administration, voluntary compliance, and higher revenue. "We are confident that the government will continue implementation with similar resolve to reap the full benefits of these reforms," he added.
The loan - $24.4 million from the International Bank for Reconstruction and Development (IBRD) - carries a LIBOR-based rate and a fixed spread and has a 20-year maturity including an eight-year grace period.
The credit - $78.5 million from the International Development Association, the World Bank's concessionary arm - carries a 0.75 service fee and was payable in 35 years, including a 10-year grace period.
