https://arab.news/v38e7
- Previously, people in Pakistan paid nominal rates on various transactions to avoid filing tax returns
- Muhammad Aurangzeb says the government is taking steps to improve tax compliance, enforcement
ISLAMABAD: Federal Minister for Finance and Revenue Muhammad Aurangzeb said on Thursday the government plans to eliminate the “non-filer” category by taking punitive actions against those who previously paid nominal amounts on various transactions to avoid filing tax returns.
The minister made the statement in an interview with Voice of America, a day after the International Monetary Fund (IMF) approved a $7 billion loan program to support Pakistan’s cash-strapped economy.
The government has implemented stringent economic reforms in recent years, including the removal of subsidies and increased power tariffs, based on recommendations from the global lender to stabilize the financial outlook before achieving macroeconomic stability.
Aurangzeb noted, after the loan approval in a separate statement, that Pakistan will face “transitional pain” if it aims to make this the last IMF program by continuing with structural reforms.
“Previously, we had this system where if someone was a non-filer, we said you can pay a nominal rate and stay outside the tax system,” he said during the interview. “Now, we’re taking it to a punitive level. It’s about time we address this invention of the non-filer status, which I think only exists in our country.”
“As a country, our hand has been forced,” he continued. “We no longer have the capacity to allow anyone in this country to remain a non-filer.”
The minister acknowledged that the IMF conditionalities had become more stringent with every loan program, attributing it to the “credibility and trust deficit.”
“We sign the structural benchmarks but never follow through,” he said. “That’s why they are strict. This time, we are going to go through the reforms.”
He maintained the government aims to widen the tax net by incorporating the agriculture, retail and wholesale sectors.
He also pointed out that measures are being taken to improve compliance and enforcement, which had previously been weak.
The IMF and World Bank chiefs have already praised Pakistan’s recent economic reforms, though international lending agencies also stress the need to stay the course in order to further strengthen the national economy.