Pakistan in the Midst of a Fiscal Emergency

October 25, 2011 Taxation in Pakistan

M A JinnahLAHORE – Pakistan needs to take immediate action to boost its tax revenues, or once again increase its levels of international borrowing to cover its budget deficit.

While speaking at the Lahore Chamber of Commerce and Industry over the weekend, the Chairman of the Federal Board of Revenue of Pakistan Salman Saddique said that the government’s tax revenues are far below estimates, and the country will soon need to turn to international money lenders to cover its expenditures.

The Chairman revealed that Pakistan’s budget deficit has now ballooned to over PKR 600 billion, calling the situation an “unannounced economic emergency”. Last year the country’s total tax collections reached PKR 1 558 billion, with PKR 441 billion being automatically assigned to defense spending, and PKR 750 billion being used on debt servicing.

The government is has already started taking rapid measures to increase revenue collections in the future, and to lessen the impact of the current budgetary shortfall. By the end of the year a new import tariff regime is scheduled to be introduced, which will decrease the occurrence of smuggling and tax evasion on imports into Pakistan.

Salman Saddique added that the Federal Board of Revenue (FBR) has recently completed a thorough restructuring and retraining of its employees. He said that the head of regional tax offices are now able to adequately address most tax cases and disputes without turning to the central branch of the FBR. The improvement should lead to faster turnaround times for tax investigations and lowered levels of corruption.

Photo by rchughtai — “not very active”