The International Monetary Fund (IMF) is suggesting changes to how taxes are applied in Pakistan.
They recommend that the government should increase the General Sales Tax (GST) on various items to 18%, including basic foods, stationery, medicines, and fuel.
According to the IMF, if these changes are made, it could generate additional revenue of around 1.3% of the country’s total economic output, which is approximately Rs1,300 billion.
However, the IMF hasn’t studied how these tax increases might affect the cost of living in the future.
The IMF’s suggestions involve making adjustments to different tax schedules. They propose eliminating certain exemptions and standardizing tax rates. For example, they recommend removing the reduced tax rate on certain items and bringing everything to a standard rate of 18%, except for a few essential items like food and important education and health products, which would be taxed at a reduced rate of 10%.
The IMF is also suggesting changes to specific schedules that currently provide exceptions or special rates for certain goods. They want to eliminate certain exemptions and bring most items under the standard 18% GST rate.
These changes could impact items like goods supplied to diplomats, imports for Export Processing Zones, and products included in various schedules, including natural gas and phosphoric acid.
In summary, the IMF is proposing modifications to Pakistan’s tax system, aiming to simplify and standardize tax rates across various goods and services, with the potential to increase government revenue. However, the full implications, especially on inflation, are yet to be thoroughly examined.