The World Bank (WB) has linked the $400 million loan for the Pakistan Rises Revenue (PRR) project with a result based annual target, saying that once the results are attained the government and Federal Board of Revenue (FBR) will get the funds.
This was revealed in a progress report for 2020 published by the Platform for Collaboration on Tax (PCT) — a joint initiative of the IMF, OECD, UN, and the World Bank.
The report gives a snapshot of the world’s four leading multilateral organizations’ cooperation in domestic resource mobilization and their responses to COVID-19.
The report stated that the government of Pakistan developed a Medium-Term Revenue Strategy (MTRS) with close support from the WB. Drawing on comprehensive WB analytical work funded by DFID, the WB organized a number of workshops to help the Federal Board of Revenue (FBR) develop a tax reform strategy that aims to address challenges with tax policy, coordination between different levels of government, a narrow tax base, addressing complexities in the tax system, compliance rates, the informal sector, and revenue administration efficiency.
Since the last Annual Report, the MTRS has evidenced two important milestones last year. First, the World Bank approved a large loan—the Pakistan Rises Revenue (PRR)—to support the Federal Board of Revenue (FBR) with $400 million.
The PRR’s objective is to contribute to a sustainable increase in domestic revenue by broadening the tax base and facilitating compliance. The loan is result-based with annual targets. Once the results are attained the government, FBR will get the funds.
The results are linked to improvements of the tax policy, for instance, the harmonization of the Sales Tax between the Federal and provincial governments as well as administrative measures such as risk-based audits.
Most of the first-year targets are on the right track despite the COVID-19 crisis. Secondly, the Inland Revenue Service (IRS) has completed the first draft of its 5-year strategic plan, which, along with the already approved 5- year strategic plan for the Customs Service, will constitute FBR’s medium- to long-term vision and mission. WB will continue assisting FBR to consolidate the MTRS providing technical advice in the tax policy and tax administration including customs fields.