The government has decided to take a loan of Rs57.1 billion from the Asian Development Bank (ADB) to expand the country’s tax net despite continued shortcomings in tax reforms.
The proposed loan will carry an annual interest rate of 1.5 to 2 per cent, according to official documents. The project has been named the Transforming and Digitalisation of Revenue Administration.
Under the plan, Rs22.5 billion will be spent on consultancy services and Rs2.77 billion on project management.
The government plans to increase the number of registered taxpayers to 12 million over the next five years. At present, about seven million people file annual tax returns in Pakistan.
The country’s current tax-to-GDP ratio stands at 10.3 per cent. The target has been set at 13.5 per cent by 2029.
The Federal Board of Revenue (FBR) said the tax net will be widened by tightening the tax system around new taxpayers.
The FBR was already carrying out reforms under its five-year transformation plan. The cabinet had earlier approved Rs350 billion in funds for the plan.
Pakistan has failed to meet most of the targets under the World Bank’s $400 million Pakistan Raises Revenue Programme. The programme had set a target of raising the tax-to-GDP ratio to 18 per cent.
Pakistan has so far taken a total of $4.7 billion in loans for FBR reforms. The proposed additional loan, equivalent to $200 million, would take the total to $4.9 billion.
The FBR has failed to meet its annual tax collection target for the past two consecutive years.
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