Govt in a fix amid IMF diktat on tax policy

THE upcoming budget presents challenges for the fragile federal coalition government. The 10-day IMF mission visit concludes with a focus on increasing revenue collection and reform demands. Undoubtedly, reforms are important, but the lender’s primary focus is increasing revenue through existing and new tax initiatives in the upcoming budget. However, the IMF delegation left without a final decision, particularly on the tax front. During their visit, IMF staff obtained additional information on key sectors. The Federal Board of Revenue also shared various tax measures and details on exemptions. The lender will shortly share a list of demands that must be approved by the federal government as a precondition for reaching a Staff-Level Agreement for a new loan. The budget is set to be announced on June 7, but tax authorities have not decided on any tax measures, and they are awaiting the IMF’s policy directions. However, the department anticipates harsh demands that will be difficult to fulfil due to divergent political viewpoints within the coalition government. Several tax officials have observed that the attitude of the Fund staff towards tax issues during these meetings was less enthusiastic than in previous meetings.