Govt targets Rs250bn from retailers to reduce shortfall

• IMF reviews FBR’s tax reforms amid Rs604bn shortfall.
• FBR to enforce CRM framework and expand CIP.
• Digital invoicing, track-and-trace to curb tax evasion.
  

ISLAMABAD: The International Monetary Fund (IMF) has examined the Federal Board of Revenue's (FBR) administrative measures aimed at raising Rs250 billion by enforcing the Compliance Risk Management (CRM) framework and expanding the tax net to include millions of retailers, The News reported.

Discussions on the CRM framework's implementation emerged during IMF talks, as the FBR faced a massive revenue shortfall of Rs604 billion in the first eight months (July-Feb) of the current fiscal year.

The IMF review mission has arrived in Islamabad and is set to begin formal negotiations today (Tuesday). The delegation is scheduled to meet Finance and Revenue Minister Mohammad Aurangzeb and his team to discuss the completion of the first review under the $7 billion Extended Fund Facility (EFF).

The government has envisaged to fetch Rs250 billion through revenue administrative measures by bringing retailers in the tax net through the Tajir Doost Scheme; implementing the Compliance Risk Management (CRM) framework, and expanding the Compliance Improvement Plan (CIP).

The FBR has hired services for preparing the CRM framework and informed the visiting IMF team that out of total received six million returns the Artificial Intelligence (AI) would be utilised to select three to five percent for holding audits but this capacity would be developed with passage of time. The FBR plans to hire independent auditors.

The FBR has implemented CRM measures in Large Taxpayers Units (LTU) in Islamabad, Karachi, and Lahore Regional offices. The FBR has strengthened its compliance mechanism by implementing an automated CRM system.

The Board has integrated all data with 145 agencies under the Memorandum of Understanding (MoUs) signed in accordance with the documentation law. The FBR pursued the CIP implementation and expansion of Tajir Doost scheme to an additional 36 cities.

The revenue collector is moving towards the implementation of digital invoicing, track-and-trace, along with stringent control and heighted enforcement to reduce fraud and tax evasion. To enhance the track-and-trace system, it would amend the protocol to incorporate aggregation.

This improvement would facilitate comprehensive monitoring at each stage of the process and throughout the entire supply chain. To equip the FBR with additional tools to improve tax compliance, the IMF would review Pakistan’s tax penalty regime across various tax type to ascertain its effectiveness, the results of the review will be used to design a General Anti-Avoidance Rule (GAAR).

On other hand, the IMF review mission and the government would discuss performance of various sectors of the economy in the first half (July-Dec) period, evaluating any requirement for making adjustments in the macroeconomic and fiscal framework for whole financial year 2024-25.

The crucial part would be formulating the broad parameters for the major contours of the next budget for 2025-26. If both sides could not evolve broader consensus on staff level agreement, it might linger on till approval of the budget for 2025-26 from Parliament.

Meanwhile, Federal Minister for Power Sardar Awais Ahmed Khan Leghari assured the international development partners that negotiations with the independent power producers (IPPs) remained free, fair, and transparent, with the option to walk away, seek arbitration, or conduct forensic audits as per contractual terms.

Addressing a session on power sector reforms, Leghari outlined the sweeping changes aimed at reducing the electricity costs and ensuring affordability for the consumers and industries. Representatives from the World Bank, IMF, ADB, IFC, KfW, German Embassy, FCOD, UNDP and AIIB attended the session.

The minister told the partners that the government had decided that it would not purchase more electricity. Leghari highlighted the government’s success in cutting 7,000MW from the Indicative Generation Capacity Expansion Plan (IGCEP), saving significant costs.

The key reforms include transitioning from “Take or Pay” to “Take and Pay” contracts, eliminating furnace oil-based plants, and converting imported coal projects to local coal. 

The minister also detailed infrastructure upgrades, including new transmission lines, battery storage systems, and regulatory frameworks for Special Economic Zones (SEZs). Plans to privatise power distribution companies (Discos) and enhance governance remain a priority, he said.

Leghari projected a clear roadmap for elimination of circular debt within five to eight years. Elimination of electricity duties, rationalisation of subsidies is yet another step toward rationalisation of electricity tariff. He said rationalisation of net metering was also on the cards which was adding Rs150 billion burden to the rest of the consumers.

With Pakistan shifting toward a wholesale electricity market and halting new power purchases, the development partners welcomed the reforms and pledged continued support.