Minister asks why IMF, WB never raised issue of growing banking spreads

Mehtab Haider
Tuesday, Nov 28, 2023

ISLAMABAD: Caretaker Minister for Privatization Fawad Hasan Fawad Monday criticized the Federal Board of Revenue (FBR) saying its performance from 2016 through 2023 was not even close to the desired results.

Addressing a conference on Pakistan Prosperity Forum organized by PRIME in collaboration with Friedrich Naumann Foundation here, he said they analyzed the FBR’s data in 2016 at the PM Office and found that 93 percent tax was collected through voluntary compliance and withholding taxes, while only 7 percent tax equivalent to Rs200 billion was the result of the FBR’s staff efforts.

He said the same analysis showed that the FBR generated tax demand of Rs150 billion, Rs175 billion and Rs270 billion through audits in 2013-14, 2014-15 and 2015-16 respectively but recovered only Rs750 million, Rs2.5 billion and Rs1.6 billion during the said period.

Tax notices to the tune of Rs600 billion were issued but just Rs4 billion could be recovered in these three years, he added. From 2016 to 2023, the FBR was given sweeping powers but the result was not even close to the desired results. He said tax burden was increased by 40 percent but the FBR’s collection did not go proportionally on the higher side.

He said the agriculture sector earned additional Rs650 billion in 2016 but tax contribution stood at just Rs7.5 billion.

Secondly, he said public sector reforms also faced the same results, as their objective was to develop a competitive private sector but the elites earned profits through cartelization. On the civil service reforms, he said a file took 27 days to move from bottom to top without having additional input from the higher side.

He said the State Bank of Pakistan (SBP) was granted autonomy under the IMF program, enabling it to share the data with the Fund.

He said neither the IMF nor the World Bank ever raised the issue of increasing the spread (difference between the deposit and lending rates) of the banks resulting in the over Rs1000 billion profits.

Fawad called for undertaking the much-needed civil service and taxation reforms to fix the ills facing the country’s economy. To a query about the privileges enjoyed by the country’s powerful elites, he replied that the people will have to rein them in and a lot more depended on how they were going to elect their representatives in the upcoming elections.

Eminent economist Dr Nadia Tahir said there was a dire need for abolishing the FBR and proposed strengthening the Planning Commission for implementing the right-sizing of the government at federal as well as provincial levels.