Key Takeaways
- The government has approved an additional $200 million loan from the Asian Development Bank (ADB) for the Federal Board of Revenue (FBR).
- The project, Transforming and Digitalising Revenue Administration (TADRA), aims to increase the tax-to-GDP ratio to 13.5% by 2029.
- The loan will be used for consultancy services and project management, with a total cost of Rs57.1 billion.
The government of Pakistan has approved an additional $200 million loan from the Asian Development Bank (ADB) to modernise the Federal Board of Revenue (FBR), bringing the total foreign funding for tax system reforms to nearly $5 billion.
The project, known as Transforming and Digitalising Revenue Administration (TADRA), is estimated to cost Rs57.1 billion and aims to increase the tax-to-GDP ratio to 13.5% by 2029, from the current 11.1%.
The Central Development Working Party (CDWP) recommended the project to the Ministry of Planning, which then forwarded it to the Executive Committee of the National Economic Council (ECNEC) for further consideration.
Of the total cost, $81 million or Rs22.5 billion has been earmarked for consultancy services, which the FBR will procure for project implementation over five years. Another $10 million has been approved for project management costs.
The Planning Commission has observed that approximately $4.7 billion has been obtained from development partners to reform Pakistan's tax system. The FBR has promised to conduct an impact assessment of previous reform interventions under foreign-funded projects.
The loan will be repaid over 25 years, with taxpayers paying an interest rate of 1.5% to 2.0% per annum. The FBR stated that the PRRP component established only foundational ICT capabilities, while TADRA is necessary to address the inadequacies of the previous infrastructure.
Despite the approval, the Planning Commission raised questions about the generic nature of the project's targets for enhancing tax collection and the number of filers. The Deputy Chairman of the Planning Commission, Ahsan Iqbal, stressed the need for clearly defined and measurable outcomes, particularly in revenue generation, tax-to-GDP improvement, and expansion of the taxpayer base.
The project will be reviewed by the Pakistan Institute of Development Economics (PIDE) to ensure a robust business model. The FBR has promised to increase active registered taxpayers from seven million to a higher number by 2029.
