Pakistan has taken a significant step toward modernizing its tax collection system by signing a contract with the global consulting firm McKinsey and Company. The move aims to digitalize the tax system, enhancing transparency and revenue growth in the country.
The decision comes amid talks with the International Monetary Fund (IMF) for a new bailout loan, where reforms in public finances, including fiscal consolidation and tax base expansion, are expected to be emphasized.
Pakistan faces challenges with its narrow tax base, as highlighted by the Federal Board of Revenue (FBR), which plans to add 1.5 million new taxpayers in the current fiscal year to address this issue.
Following the signing of the contract, a high-level meeting was held at the FBR headquarters, attended by officials from the finance ministry, FBR, McKinsey, and Karandaaz. The collaboration aims to leverage technology for modernizing tax operations and improving efficiency and transparency.
Finance Minister Muhammad Aurangzeb emphasized the government’s commitment to digital transformation for enhancing tax collection, foreseeing positive economic impacts.
FBR Chairman Malik Amjad Zubair Tiwana expressed FBR’s dedication to leveraging technology to enhance revenue collection, emphasizing the project’s significance in achieving transparency and efficiency.
Pakistan’s urgent need for financial assistance is underscored by a balance of payment crisis, requiring substantial payments for debt and interest servicing in the next fiscal year. Talks are underway for a new IMF program, which, if successful, would mark Pakistan’s 25th IMF bailout.
IMF-led reforms necessitate Pakistan to raise its tax to GDP ratio, address losses in state-owned enterprises, and manage energy sector losses, aligning with the country’s economic objectives.
Despite economic challenges, Pakistan’s finance ministry expects modest economic growth and a decline in inflation, reflecting efforts to stabilize the economy amidst ongoing reforms and financial negotiations.
