By Staff Reporter
ISLAMABAD: Pakistan’s finance ministry on Friday defended the tax exemptions in the budget for next year, saying they are “triggers” for economic growth and that the country is “not dogmatic” about its spending plans, though it also shows a willingness to make adjustments after the International Monetary Fund (IMF) expressed its concerns.
Earlier this week, the resident IMF representative for Pakistan, Esther Perez Ruiz, in a press statement, raised issues with the recently presented budget for the fiscal year 2023/24.
The IMF said the long list of new tax expenditures further reduces the fairness of the tax system and undercuts resources needed for vulnerable people in the BISP. It said the budget misses an opportunity to broaden the tax base in a more progressive way and the new tax amnesty on bringing dollars into the country runs against the IMF program’s conditionality and governance agenda and creates a damaging precedent.
“The tax exemptions that have been announced in the Budget are ‘triggers’ of growth in the real sectors of the economy. This is the sustainable path to provide employment and livelihood to the common citizen. In any case, the amount is fairly small,” a finance ministry statement said.
The ministry said next year’s budget was not part of discussions on the latest disbursement and that the government was keen to complete those talks and had already taken many “difficult and politically costly decisions” in this context.
“Though the Budget FY24 was never a part of the 9th review, however in line with PM’s commitment to the MD IMF, we shared the budget numbers with the IMF mission. And we are continuously engaged with them even on the budget,” the ministry’s statement said.
“The coalition government has already taken many difficult and politically costly decisions in this context. We are not “dogmatic” about any element of the budget FY24 and are keenly engaged with the IMF to reach an amicable solution.”
The ministry said it was fully committed to the IMF program and had resolved all technical issues for the 9th review, which was delayed by external financing gaps.
“The only outstanding issue was external financing which we understand was also amicably resolved in the Prime Minister’s telephonic call of May 27th, with the MD of IMF. The government is fully committed to the IMF program and is keen to at least complete the 9th Review.”
The ministry said it had added more than 1.1 million new taxpayers in the last 11 months, and imposed a 0.6% withholding tax on cash withdrawals over 50,000 rupees ($312) to broaden the tax base.
It also said it had increased the budget allocation for the Benazir Income Support Program (BISP), a cash transfer scheme for the poor, from 400 billion to 450 billion rupees, and provided 35 billion rupees for targeted subsidies on food items through the Utility Stores Corporation.
On the issue of amnesty for undeclared assets, the ministry said it had only dollarized the value of an existing provision of the Income Tax Ordinance, which allows people to declare assets up to $100,000 without any questions.
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