Punjab allowed to borrow funds from WB for introducing tax reforms.
ISLAMABAD: In total disregard to the growing external public debt, tt
The Central Development Working Party (CDWP) approved a concept clearance paper for the Punjab Resource Improvement and Digital Effectiveness Programme (PRIDE) worth $304 million (Rs50 billion), according to a statement of the Ministry of Planning.
It was observed that the provincial government of the Pakistan Tehreek-e-Insaf (PTI) used 2017-18 figures from the Pakistan Muslim League-Nawaz’s tenure for getting approval for the concept clearance paper instead of using the latest figures of the fiscal year 2019-20. The government of Chief Minister Usman Buzdar did not mention the tax performance of his two years in power.
The Punjab government’s documents showed that Punjab’s tax-to-gross domestic product (GDP) ratio increased from 0.4% in 2009-10 to 1.2% in 2017-18. The Punjab government followed in the footsteps of the federal government that also acquired a loan of $400 million from the World Bank in the name of tax reforms.
Former Federal Board of Revenue (FBR) chairman Shabbar Zaidi was not inclined to take the World Bank loan for tax reforms. Pakistan’s public debt-to-GDP ratio increased to an unsustainable level of 87.2% of GDP by the end of June 2020 – an increase of almost 15% in two years of PTI rule.
The government of Punjab plans to initiate efforts to increase its tax collection by including the potential untapped areas, according to the project documents.
The $304 million in the loan has been sought from the World Bank to “make taxation more progressive, broaden the tax base, reduce interaction between taxpayers and tax collectors and facilitate taxpayers to improve the ease of doing business,” the papers said.
Out of the $304 million, the provincial government is keen to get $30 million in grants but terms are not final yet.
The proposed concept includes multiple dimensions like business process re-engineering, revision, change of rules and regulations, development of comprehensive automated systems, the introduction of e-services, and institutional capacity building. All these functions do not need any foreign money, rather it requires political will to enhance the narrow provincial tax base. The concept clearance paper also used 2014 statistics to highlight the tax gap – the difference between the potential and actual tax collection by the province.
In return for the loan, the WB has imposed conditions of reducing “un-budgeted fiscal risks including unfunded pension liability of the government of Punjab, and reduce variance between original and actual budget expenditures”, according to provincial government documents.