IMF Warns Pakistan To Prioritise Tax Reforms

by Robert Lee, Tax-News.com, London

11 October 2001

An International Monetary Fund staff report on Pakistan's last tranche of its Stand-By Arrangement has warned Pakistan that the issue of taxation must remain the top priority of the government's reform agenda.

The report found that Pakistan's administration was largely ineffectual and disorganised and tax collection procedures were described as weak. It was also recommended that the practice of widespread exemptions be abolished.

However, Eduardo Aninat, deputy managing director and acting chaiman of the IMF Executive Board, has said that Pakistan's achievement under the Stand-By Arrangement has been 'commendable.' He explained: 'While tax revenue collection was weaker than expected, the budget deficit was kept within the targeted level. Despite adverse weather conditions, real per capita GDP rose, inflation has been lower than expected, and external balances and official reserves have improved in line with program targets. The implementation of structural reforms has been broadly on track.'

But he added that the need to broaden the country's tax base and to fundamentally reform the tax administration is of the utmost urgency.

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