Bank loan

Measures underway to obtain a loan from the World Bank: Tarin – Journal

ISLAMABAD: The government will make every effort to resolve three to four outstanding issues, including tax harmonization, to secure loans worth over $ 800 million from the World Bank within the next month.

Pakistan has already received $ 400 million for tax administration reforms out of a total of 1.2 billion World Bank loans, said Finance Minister Shaukat Tarin. Dawn the Saturday. “We need this money and will take all the preliminary steps,” he said.

On tax harmonization, the minister said he would hold a meeting with provincial finance ministers in the next seven to ten days to resolve outstanding issues. He indicated that several meetings had already taken place in this regard at the technical level.

Harmonization involves an agreement between the federal government and the provinces to apply the same definitions, principles and rates for the general sales tax (GST) on goods and services, according to a World Bank document.

Two panels busy preparing measures to broaden the tax base

This means that the federal and provincial governments would revise legislation and regulations to apply the same definitions of economic activities subject to GST on goods and services, levying the GST based on place of sale / consumption rather than headquarters. corporate social responsibility, and preferably, but not necessarily, standardize their tax rates.

Mr. Tarin agreed that there were challenges and that the federal government would step in to resolve these issues between the Federal Board of Revenue (FBR) and provincial tax authorities. He said this issue would be resolved within a month. “I have a firm resolve to solve this problem,” he added.

GST rates also needed to be streamlined. Currently, there are 26 rates for different categories of goods and several rates for services in different provinces. These multiple rates complicate both tax administration and taxpayer compliance.

Special Assistant to the Prime Minister for Finance and Revenue Dr Waqar Masood Khan said Dawn that two sub-committees were already working to propose measures to broaden the tax base, one of the main initiatives of the World Bank reform project.

He said the committee reports and the government’s action plan based on the recommendations were expected by the end of this month. Dr Khan said the government will announce a clear strategy by August 31 to broaden the tax base and bring retailers back under the tax net. He said the issue of fiscal harmonization with the provinces would be resolved for better tax collection and facilitation of taxpayers.

Tax harmonization will allow the collection of GST through a single online portal where businesses will file, pay GST and claim GST rebates for goods and services at the same time. Harmonizing the GST will help the RBF and provincial tax authorities broaden their tax base and increase compliance by sharing taxpayer information.

Recent World Bank estimates indicate that Pakistan collects only half of the economy’s fiscal potential, leaving almost two-thirds of GST obligations and more than half of income taxes uncollected. For example, most retail traders do not pay taxes.

Finance Minister Shaukat Tarin said the World Bank demands Pakistan to notify power sector reforms. He said the government would soon address the issue of the integrated power generation plan at the next Common Interest Council meeting. “We will have the plan approved at the ICC meeting,” he said.

This (approval of the integrated energy plan) is one of the prerequisites for obtaining a loan of around $ 400 million in the energy sector. Likewise, the government is also finalizing the circular debt management plan in advance to ensure smooth navigation.

Mr Tarin said there were two other requests from the World Bank, which he did not disclose.

According to the World Bank report, Pakistan’s tax system is very complex and even people and businesses who want to pay their taxes find that it costs them a lot of time and money to comply.

For example, the division of the GST on services between the federal government which collects the product tax and the provinces which collect the service tax, means that companies providing services across Pakistan must file 60 tax returns. income per year only for the GST and comply with the various laws, regulations and administrative procedures for the federal level and each of the four provinces.

Posted in Dawn, le 15 August 2021