Tax agriculture to increase revenue: IMF to Pak

Islamabad, Nov 17: On Monday, Nov 17 the International Monetary Fund (IMF) has asked the Pakistan government to introduce agriculture tax if it is serious about increasing the country's revenue.

The Dawn newspaper reported that the fund's executive board will meet in Washington on Friday, Nov 21 to review an economic programme for Pakistan, which includes a 7.6 billion dollar loan to meet the country's serious balance of payments difficulties. Pakistan is expected to start receiving the money from the end of this month. The IMF will deliver four billion dollar in 45 days, while the rest will be disbursed in 2009. The fund required Islamabad to undertake a set of prior actions, including a two per cent increase in interest rates, which was announced last week. This is the highest increase in more than a decade.

The IMF, however, has expected Pakistan to do more. One of the key elements of these measures is a proposed tax on agricultural products, which the IMF said has become unavoidable.

During a visit to Washington last month, Prime Minister's Economic Adviser Shaukat Tarin promised to bring all sectors, including agriculture, under the tax net to strengthen the national economy.

A financial analyst noted that Pakistan had promised levying agriculture tax in the past but somehow wriggled out of its promises.

''But the fund has now warned Pakistan that there's no escape from it,'' the analyst said, adding ''If Pakistanis once again fail to impose agriculture tax, this will be the last IMF programme they will have.'' The fund expects Pakistan to introduce other taxes as well and hopes that Islamabad will soon make new laws to achieve this target.

The IMF also expects the government to levy new taxes on real estate appreciation, stock market profits and capital gains.

If the proposals are implemented, the new taxes will become effective next year.

The fund has also suggested a drastic reduction in the government spending and has proposed a performance criterion to increase revenue collection to a certain point.

Pakistan and the IMF are expected to determine the precise amount of the proposed increase later this week.

Opposition parties in Pakistan have already started criticising the government for seeking the fund's assistance. Even though details of the IMF's conditions have not yet been published, the critics say the fund always imposes harsh restrictions that impede economic growth.

But, IMF officials describe such suspicions as unfounded, saying that the Pakistan aid package will not impede development and will not hurt the poor.

UNI