IMF wants govt to generate revenue indirectly or though fair taxation

LAHORE: Assistance from Saudi Arabia and China has provided some
relief to the new government but its foreign exchange needs are so
high that it has to seek the IMF that wants government to increase
revenues either indirectly or though fair taxation.A perception has
been created in Pakistan that the IMF conditions for a bailout
package are very tough and would hurt the poor. Actually, IMF
always demanded in all its packages to exploit the actual revenue
potential of the country and check corruption that causes leakages
almost equivalent to the current tax revenues.In fact, IMF wants to
make sure that the country develops capacity to return back the
loans it provided as a lender of last resort. A lender of last
resort is the party that agrees to provide loan to a country where
every other lender is unwilling to trust it.It is similar to the
loan sharks, widespread in our society, who lend to the poor on
unbearable terms.But the difference between loan sharks and the IMF
is that the former is not bothered by the way you consume your
loan; he simply wants the borrower to go on paying the high mark-up
on monthly basis even if you are unable to pay the principal
amount.The IMF on the other hand suggests ways to increase revenues
and plug leakages. In Pakistan’s case, it has been advising
government after government to fully document the economy and
privatise loss-making public sector companies.Alternately, it
desires that the state improves the efficiencies of public
companies to avoid huge losses. In the last thirty years, no
government in Pakistan has been able to fulfil these two demands of
the Breton Wood lender.Instead, every government negotiates with it
the different ways to increase revenues. If the economy is fully
documented, the revenues would automatically double.However, in the
last thirty years we have seen that the informal or non-documented
sector of the country enlarging. In the same way the losses of
public sector entities also have ballooned from Rs150 billion in
1999 to over Rs1,200 billion now.Under these circumstances, the IMF
is left with no option but to ask the government to raise revenues
through indirect taxes that hurt the common man. One fails to
understand who the actual culprit is – the IMF or successive
governments of Pakistan?We are sitting on a huge data of seven
million tax evaders, but are reluctant to confront them. The bigger
tax evaders are from influential segments of the society.We have
arrested so many public figures, but never apprehended a smuggler
or tax evader. If the government has evidence of wrong doing by
high profile individuals they should not be given notices but put
in jails.Why is government afraid of raiding markets flooded with
smuggled goods? Who will check that an item imported at Rs100 that
officially costs the importer Rs150 is being sold at Rs1,500?Is the
importer (probably the one indulged in under-invoicing) paying tax
on such huge profit? If we succeed in taking action against 25
percent of such tax evaders, it might resolve half of our
problems.We are moving from pillar to post to get the IMF package
of $6 billion (Rs840) but the electricity consumers both private
and public owe the power distributors over Rs850 billion.What is
stopping us from recovering this amount? Our power losses are
ballooning and because of that we are unable to bill electricity
worth more than Rs400 billion annually. This is equivalent to
around $3 billion.Pakistan Steel Mill, the biggest in Pakistan, is
incurring huge losses while smaller private sector mills are
operating in profit. PIA is in doldrums while Air Blue is operating
on profit.The cost of private sector furnace oil run power plants
is half the cost of public sector furnace oil-based power plants.
Why those responsible for these efficiencies are not nabbed?Finance
Minister Asad Umar has confidently predicted that this would be the
last IMF programme for Pakistan. He conveniently forgot that
Shaukat Aziz and Ishaq Dar also boasted the same.Pakistani
government would have to muster political will to confront the
influential and refrain from marginalising the poor. The
devaluation in last six months is already an unbearable tax that
they are forced to pay.
Source: FS – All-News2-Economy
IMF wants govt to generate revenue indirectly or though fair taxation