ISLAMABAD: In his first official visit to a government body after assuming charge as finance minister, Muhammad Aurangzeb visited the office of Pakistan’s tax collection authority on Wednesday, stressing the need to digitize the institution to ensure transparency in revenue collection ahead of the country’s final review of a financial assistance program with the International Monetary Fund (IMF).
Pakistan has one of the lowest tax ratios in the world, according to the World Bank. The South Asian country’s failure to generate tax revenues in higher amounts stems from the fact that it has a narrow tax base, low compliance rate, an inefficient tax administration and massive tax evasion, the international financial institution has said.
Pakistan desperately requires external financing from the IMF to keep its fragile $350 billion economy afloat. One of the key demands of the IMF from Pakistan has been to improve its tax administration and broaden its tax base.
In a meeting with the Federal Board of Revenue (FBR) board members, Aurangzeb stressed the urgent need for digitizing the FBR to enhance transparency and efficiency in tax collection, Pakistan’s finance ministry said.
“These initiatives would focus on enhancing tax collection through improved FBR governance, comprehensive documentation of the economy, and full-scale digitization,” the ministry said.
“The government is considering strategies to broaden the tax base by incorporating wholesale/retail, real estate, and agriculture sectors into the tax framework.”
The Pakistani finance minister said implementing digital solutions are pivotal to modernizing the country’s tax administration. He added that leveraging technology and enhancing transparency can help build a more equitable tax system that fosters economic growth.
“The Finance Minister’s visit to the FBR Headquarters underscores the government’s dedication to strengthen fiscal governance and promoting economic prosperity in Pakistan.”
Pakistan’s finance ministry said on Wednesday that the second and final review of a Stand-By Arrangement (SBA) with the IMF would be held in Islamabad from Mar. 14-18.
Islamabad secured the last-gasped rescue package last summer to avert a sovereign default. The last review, if successful, will release a tranche of around $1.1 billion.
Prime Minister Shehbaz Sharif has already directed his finance team, headed by Aurangzeb, to initiate work on seeking an Extended Fund Facility (EFF) after the current standby arrangement expires on April 11.
The lender has said it will formulate a medium-term program if Islamabad applies for one.
