IMF Pushes Pakistan for Tougher Tax Enforcement

The International Monetary Fund (IMF) has assessed the Federal Board of Revenue’s (FBR) initiative to broaden the retailer tax base and implement Compliance Risk Management (CRM) strategies, aiming to raise Rs250 billion in additional revenue. This evaluation is part of the ongoing IMF review mission in Islamabad, as Pakistan grapples with a Rs604 billion tax revenue shortfall in the first eight months of the fiscal year.

A key component of this initiative is the Tajir Doost Scheme, designed to integrate retailers into the formal tax system. Additionally, CRM enforcement will be deployed in Large Taxpayer Units (LTUs) in Islamabad, Karachi, and Lahore. To strengthen tax oversight, the FBR has linked its database with 145 government agencies under documentation laws and is expanding its compliance improvement strategy to 36 more cities.

Efforts to combat tax evasion include AI-driven audits, where 3-5% of six million tax returns will be flagged for review. The initiative also involves hiring independent auditors, implementing digital invoicing, introducing track-and-trace systems, and enforcing stricter tax compliance.

The IMF is also evaluating Pakistan’s tax penalty framework, proposing a General Anti-Avoidance Rule (GAAR) to enhance compliance.

Meanwhile, negotiations are ongoing regarding broader fiscal adjustments for FY2024-25 and the budget framework for FY2025-26. Talks may extend until the budget is approved by Parliament if no agreement is reached at the staff level.