Pakistani authorities have reportedly informed the International Monetary Fund (IMF) of the possibility of not implementing the 0.6 percent withholding tax on all bank transactions, a well placed source revealed exclusively toBusiness Recorder. This possibility was discussed with the Fund staff during the eight mandatory quarterly review under the $6.64 billion Extended Fund Facility held in Dubai from 29 July to 7 August.
However, the source further revealed that during the policy level talks with the Fund headed by Finance Minister Ishaq Dar an alternate revenue source also came under discussion. Traders and transporters have launched an aggressive countrywide campaign against this levy vowing to keep up pressure until the government withdraws it. While negotiations with traders are ongoing, the government took the decision to halve the budgeted levy to 0.3 percent on all bank transactions till end-September.
The government has also renegotiated a new timeline as well as previously agreed entities for privatisation with the Fund; and requested a biannual instead of the agreed quarterly review citing three months as inadequate to complete the agreed structural reforms. Sources further stated that Finance Minister and the new IMF mission chief Herald Finger would also hold a media talk today (Friday) as the review would conclude late Thursday night.
The government was unable to complete the privatisation process of Heavy Electric Complex (HEC) and National Power Construction Company (NPCC) and failed to achieve Federal Board of Revenue (FBR) revenue collection target of Rs 2,691 billion agreed with the Fund. The government has also announced increase in gas prices from August 1 to allay the IMF concerns raised in the staff level report released after the conclusion of discussions on seventh review that gas price notifications, normally done on a bi-annual basis, have been postponed since 2014 due to political protests. Minister for Petroleum and Secretary Petroleum committed to increasing gas prices by around 20 percent from August 1, 2015 – days before the talks between the two sides began on the eighth review.
Banking transactions: 0.6 percent WHT not possible, IMF told