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Pak's secret deal with IMF will fool masses by camouflaging controversial tax


May 20, 2011 - Islamabad

The Pakistan government has reached a secret understanding with the International Monetary Fund, under which the Reformed General Sales Tax will be imposed in the next fiscal budget, but will not be named as RGST or VAT because the government may not be able to get the relevant financial legislation passed through the National Assembly.

This simply means that the economic mangers of the government, who held talks with an IMF team in Dubai and briefed them on the salient features of the next budget, have tried to fool the masses, urban-based political players and business tycoons by leaking the false information that the RGST had been shelved, The News reports.

In essence, the economic managers have tried to camouflage a secret deal with the IMF, while in reality, the official statement after the talks said that discussions on the issue would continue in the weeks ahead and a fund mission would visit in July 2011.

"The budget deficit target for the next fiscal year has not yet been finalised and discussions on the subject between the IMF and Pakistan are still underway," said a senior government official.

"Tax measures are to be taken in the budget for 2011-12 in a manner that the objective of the RGST will be achieved without mentioning its name, and the IMF will then start its fifth review under the $11.3 billion Standby Arrangement (SBA) programme in July, paving the way for the next tranche of $1.3 billion," revealed an official, who took part in the seven-day talks with the IMF in Dubai.

An IMF spokesperson in Washington said that the introduction of the RGST still remains a paramount goal for the next fiscal year, adding that reducing the budget deficit would require higher revenue through tax reforms to broaden the tax base, including implementing measures to reform the GST.

"In this context, it is also important to note that the IMF and Pakistani authorities discussed how some exemptions could be removed," he said.

"Also, discussions on the budget, including the fiscal deficit target for the FY 2011-12, are still going on. Going forward, what matters are durable measures that enhance the sustainability of Pakistan's public finances," the spokesperson added.

ANI

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