IMF Calls for Heavy Taxation
Pakistan’s tax revenue of PKR 7.47 trillion may fall short in face of rising inflation.
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The IMF is worried about Pakistan’s revenue generation due to rising inflation. Taxation forms 2.6% of the GDP and plays the largest role in financing government expenditure. In the past year, FBR has been able to surpass its goals for revenue collection for the year, with most experts attributing this to inflation.
Since FBR underestimated inflation projections for this year, therefore, the tax-to-GDP ratio has fallen quite significantly. Compared to the projected 9.6% of GDP, Pakistan’s tax revenue will form 8.9% of the GDP instead.
IMF has directed the government to employ its fiscal tool more strongly to prevent the need for borrowing money. However, IMF’s policies are often inconsiderate of Pakistan’s circumstances. For instance, in this case, Pakistan’s tax system depends mainly on sales tax or indirect tax as most of the country doesn’t earn a fixed wage that is documented.
Therefore, a tax of PKR 600 Billion will hardly affect the lesser privileged in the country. Not applying such taxes isn’t a political stance, but also a stand for the people.
GRAPHICS OF THE DAY
INSTAGRAM POST
Inflation in Pakistan during October 2022 — www.instagram.com
⚫ Inflation increased by 4.7% compared to September 2022 and annual inflation increased by 26.5%
⚫ Transport was most expensive along with food, health, clothing, housing and education in October 2022 compared to September 2022
⚫ Annual urban inflation in October 2022 was 24.5%, while annual rural inflation was 29.5%, both increasing sharply in comparison to September 2022
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