Pakistan has signed an agreement with consulting giant McKinsey and Company to digitalize its tax collection system, a move aimed at modernizing tax collection processes and enhancing transparency. The initiative comes as Pakistan seeks to implement reforms amid negotiations with the International Monetary Fund (IMF) for a new bailout loan.
The IMF-led structural reforms necessitate Pakistan to increase its tax to GDP ratio from around 9 percent to 13-14 percent, broadening the tax base, improving tax administration, and ensuring debt sustainability. The country’s tax collection agency, the Federal Board of Revenue (FBR), highlighted the need to expand the tax base, aiming to add 1.5 million new taxpayers during the current fiscal year.
Following the signing of the contract with McKinsey, a high-level meeting was convened at the FBR headquarters, attended by officials from the ministry of finance, McKinsey, and Karandaaz. The collaboration with McKinsey underscores the government’s commitment to digital transformation and improving tax collection for sustained economic growth.
Finance Minister Muhammad Aurangzeb emphasized the significance of digitalization in modernizing tax collection and expressed optimism about its positive impact on Pakistan’s economy. FBR Chairman Malik Amjed Zubair Tiwana reaffirmed FBR’s commitment to leveraging technology to enhance revenue collection, aiming for transparency and efficiency.
Amid a chronic balance of payment crisis, Pakistan is in need of substantial financing, with plans to secure a new IMF loan. This would mark the 25th IMF bailout for the country, with structural reforms targeting various economic sectors, including taxation, state-owned enterprises, and the energy sector.
Despite economic challenges, Pakistan anticipates modest growth and a decrease in inflation rates for the current fiscal year. The government remains focused on implementing reforms to address economic vulnerabilities and promote sustainable development.