ISLAMABAD: Pakistan on Friday greenlit another $200 million (Rs57 billion) loan from the Asian Development Bank (ADB) for tax digitalisation, despite serious questions raised by the Planning Commission.
The project was one of seven projects worth Rs116bn cleared by the Central Development Working Party (CDWP) at a meeting presided over by Planning Minister Ahsan Iqbal.
He conditionally cleared the Rs57bn Transforming and Digitalising Revenue Administration (TADRA) project, which aims to increase the tax-to-GDP ratio to 13.5pc by 2029 from 11.1pc.
The approval comes as the country has already utilised more than $4.7bn in foreign loans to improve revenue collection, while the tax-to-GDP ratio continuestohoveraround11pc.
The planning minister ‘recommended the project to the Executive Committee of the National Economic Council (Eenec), with the condition that the Pakistan Institute of Development Economics (PIDE), a stateowned think tank, thoroughly review its business model,’ an official statement said.
It was placed on record that PIDE had already conducted a study on loans taken by the government to reform the energy sector and tax administration, ‘which indicates that approximately $4.7bn has been obtained from development partners to reform Pakistan’s tax system. ‘Therefore, the Revenue Division should conduct an impact assessment of previous reform interventions undertaken under the Tax Administration Reforms Programme (TARP), Pakistan Single Window (PSW), Integrated Transit Trade Management System (ITTMS) and Pakistan Raises Revenue Project (PRRP) the four major loan programmes for the Federal Board of Revenue to determine the impact of the reforms and value for money.
The project’s clearance was necessary to secure a $200m loan that ADB management had already committed and that required formal approval by its board.
The loan is part of the ADB’s Investment Project Financing (IPF) under its Ordinary Capital Resources (OCR) concessional window, or Asian Development Fund, and carries a standard concessional term of 25 years, including a five-year grace period, at an annual interestrate of1.5pe to 2pc.
Based on objections raised by various analytical wings of the Planning Commission and views expressed by PIDE, Iqbal ‘stressed the need for clearly defined and measurable outcomes, particularly in terms of revenue generation, improvement in the tax-to-GDP ratio and expansion of the taxpayer base’, an official statement said. It added that the FBR had assured that the loan would help increase the tax-to-GDP ratio to 13.5pc by 2029 and bring more taxpayers into the tax net.
The Planning Commission demanded that, before approving the project and the loan, the FBR should first seek concept clearance on whether the project was synchronised with the FBR’s overall Rs350bn Transformation Plan approved by the federal cabinet. It also sought a matrix of policy actions proposed under the transformation plan, along with the implementation status of each policy action or initiative under previous, ongoing and proposed programmes.
The FBR reported that the project was part of its 2024-28 Transformation Plan for accelerating the digitalisation of the revenue administration ecosystem, enhancing operational efficiency, improving taxpayer compliance, ensuring transparent customs clearance and elevating Pakistan’s global competitiveness.
The Planning Commission had reservations that the project should not proceed without an impact analysis of already executed projects aimed at reforming and strengthening the FBR’s capacity, a gap analysis of existing facilities, a needs assessment and a feasibility study to determine the requirements of the proposedintervention.
The CDWP also recommended the ‘PakSat-2 Satellite System’, costing Rs37.2bn, to the Ecnec for approval.
The CDWP itself approved five projects with a combined cost of Rs21.59bn. These included the Rs5.015bn ‘Promotion of Olive Cultivation on Commercial Scale in Pakistan Phase-II’. It also approved Rs6bn to establish the Dr Ashfaq Ahmad Khan Centre in Basic Sciences across eight national centres.-Khaleeg Kiani