An official privy to the budget-making process told Dawn on Monday that the government had assured the IMF that the measures would be introduced to achieve the revenue target of Rs1,952 billion. – File Photo

ISLAMABAD: The government has decided in principle to introduce new taxation measures of Rs103 billion in the budget for 2011-12, mostly in the form of indirect taxes which will add to the burden on the common man.

The decision is aimed at keeping the budget deficit below four per cent -- a condition that will pave way for release by the International Monetary Fund of a tranche of $1.3 billion.

An official privy to the budget-making process told Dawn on Monday that the government had assured the IMF that the measures would be introduced to achieve the revenue target of Rs1,952 billion.

He said an amount of Rs261 billion would be netted as a result of several factors, especially the rising inflation next year. The IMF has projected that Pakistan’s inflation next year could exceed 15 per cent which will contribute to an increase in the share of general sales tax in total collection.

According to the official, the base figure, a benchmark for revenue measures, has been set at Rs1,588 billion, considerably less than the collection target for 2010-11. But the IMF has estimated the figure at around Rs1,580 billion.

During recent talks with the IMF in Dubai, Pakistan’s economic team showed an upward revenue target as the base figure in a bid to reduce the size of new revenue measures in the budget -- a move that could minimise political opposition, especially from the PML-N, during the process of getting the budget approved in parliament.

An FBR official said the failure to achieve the revenue target of Rs1,588 billion by the end of June as agreed with the IMF might lead to revision of all macroeconomic indicators.

Economic experts are of the opinion that reaching even close to the Rs1,588 billion target by the end of June will be quite difficult.

The revenue collection in May will be a deciding factor for the economic team to finalise the new measures. The government has estimated Rs152 billion revenue for the month and the FBR as on May 29 raised Rs132 billion. “We expect that the revenue collection will be closer to the target,” said an official of the finance ministry. The IMF will hold the fifth review on Pakistan’s economy in July to see the progress in commitments made at the Dubai meeting. “We have no other option but to cover the shortfall by either cutting expenditures or taking additional revenue measures during the post-budget period,” the official said.

He said if the government did not take new revenue measures there would be more pressure on other economic indicators. The only option for the government, he added, was to introduce new measures and plug loopholes to achieve the desired revenue target of Rs1,588 billion.