By Urdu Report Editorial Team
The federal government has begun reviewing proposals for a new local tax if Islamabad is made an autonomous unit, according to sources.
The proposed tax would generate revenue within the federal capital to support basic services and the administrative structure. The revenue collected in Islamabad would be spent within the capital’s boundaries.
Proposed Use of Tax Revenue
According to sources, initial proposals include collecting taxes to fund hospitals, schools, colleges and other educational institutions in Islamabad.
The revenue would also support welfare activities and the city’s administrative structure.
The proposals are expected to be discussed with the International Monetary Fund (IMF) delegation during negotiations on the fifth review of Pakistan’s Extended Fund Facility programme, which are scheduled to begin this month.
The new tax could be introduced in the budget for the next fiscal year.
Tax Proposals Still Under Preparation
Sources said a final estimate of the amount to be collected has not yet been prepared. The proposed tax is intended to create fiscal space for Islamabad while taking its infrastructure needs into account.
The Federal Board of Revenue (FBR) will initially prepare the tax proposals. These will then be submitted to a subcommittee formed to consider taxation for the infrastructure required to make Islamabad an autonomous unit.
After approval by the subcommittee, the proposals will be presented to a committee headed by the Minister for Planning. If approved there, they will be submitted to Prime Minister Shehbaz Sharif.
A final decision will be taken after approval from the IMF, according to the sources.
Pakistan-IMF Review Talks
The Ministry of Finance has directed all relevant ministries and institutions to compile the necessary data and reports ahead of the economic review talks with the IMF.
Relevant ministries will brief the IMF delegation on structural benchmarks and economic reform targets, sources said.
Energy sector reforms will also be an important part of the discussions. The talks are expected to cover targets related to circular debt in the electricity and gas sectors.
If Pakistan successfully completes the negotiations with the IMF, the fifth tranche under the current loan programme could be released.
IMF review
Pakistan is expected to receive $1 billion under the fifth tranche. An additional $200 million could be provided to address losses caused by climate change.
This would bring the expected total financing from the IMF review to $1.2 billion.
Sources said the proposed roadmap also includes developing a new system for the use of local taxes and the distribution of resources.
Alongside the administrative structure, efforts are being made to coordinate financial matters. The proposed tax system will also incorporate recommendations from the international financial institution aimed at making revenue collection more effective.
