Pakistan’s Interim Government Considers Ordinance to Digitize Economy

The interim government in Pakistan is considering legislative and administrative changes to digitize the country’s economy. One of the proposals involves empowering the Ministry of Information Technology to act as a data-gathering agency to expand the tax base, which currently consists of only 4.2 million filers.

The Federal Board of Revenue (FBR) has suggested ways to increase the number of income tax return filers. This includes having the Ministry of Information Technology play a central role in collecting data from provinces and federal departments to identify non-filers and register new taxpayers.

The size of Pakistan’s informal and formal economy is nearly the same, highlighting the need for digitization efforts. There currently 7.6 million registered persons and companies with the FBR, but only 4.2 million filed their returns in the last fiscal year.

An ordinance has discussed to make it legally binding for provinces and relevant agencies to share data with the Ministry of Information Technology, as part of the digitization efforts. However, ordinances have a limited lifespan of four months.

Additionally, two task forces established to aid in the digitization process. The Ministry of Information Technology will play a key role in both task forces.

While these efforts are underway, some participants have expressed concerns about the FBR’s performance, and there is a desire to restructure the FBR without involving its two key services – Inland Revenue and the Customs Group.

The challenge lies in translating available data into actionable and taxable information. The FBR has proposed the creation of a new authority or wing for registering new taxpayers, and the oversight role of this authority could assigned to another ministry.

Despite a nearly 30% increase in tax collection, some participants have attributed it to high inflation and believe that without innovative measures, there may be a shortfall in achieving the FBR’s tax collection target.

Caretaker Prime Minister Anwaarul Haq Kakar has also announced a new easy visa regime for foreign businessmen wishing to visit Pakistan. Foreign businessmen can obtain visas based on a single document from their country or international business organizations, making Pakistan more accessible for business. Pakistani chambers of business or business organizations can also issue documents for foreign businessmen to obtain visas easily, fostering economic growth and business opportunities in Pakistan.