Miftah targets tax reforms, touts rupee flexibility

ISLAMABAD: Adviser to the Prime Minister on Finance, Revenue and Economic Affairs Miftah Ismail said he plans significant tax reforms in the five months before the government’s term ends ahead of a 2018 election, and touted a policy of greater currency flexibility.

The government has in recent months devalued the rupee, imposed tariffs on imported goods and sought to boost exports to reduce growing balance of payments pressures fuelling concern about the health of the economy.

The government this month borrowed $ 2.5 billion from international markets via Sukuk and Eurobond offers that were vastly oversubscribed and fetched lower-than-expected rates.

Ismail told Reuters in an interview late on Thursday that he plans tax reforms to focus on widening the tax base, simplifying tax structures, and slashing personal tax rates to encourage more people to file returns.

“We have to reduce rates and Prime Minister Shahid Khaqan Abbasi is very eager to especially reduce rates on individuals,” Ismail said at his home in Islamabad.

Tax rates on individuals vary in the country but can be as high as 30 per cent for salaried individuals and 35 per cent for non-salaried individuals.

“(Abbasi) wants to bring it to 15 per cent or so,” Ismail said.

The State Bank of Pakistan devalued the currency by about 5 per cent this month, and the market expects further weakening of the rupee before the polls in mid-2018 to ease balance of payments pressure stemming from a widening trade deficit and growing fiscal deficit.

The devaluation followed the departure of former finance minister Ishaq Dar, who was staunchly opposed to a weaker rupee and had admonished the central bank for an attempt to weaken the currency in July.

Ismail said the government has altered its policy of the past few years, under which it had essentially pegged the rupee to the dollar and defended its value.

“We have decided to not do that,” Ismail added.

When asked if he would be opposed to the rupee weakening another 5 per cent, as the market expects, Ismail said there was a policy of greater flexibility for the currency and he would not be hostile to it either weakening or firming.

“I am a big believer in the free market,” he said. “We are largely letting the rupee be.”

Ismail also said Pakistan may return to international markets for a fresh bond offering but that this was unlikely before late 2018.

“We will probably not go back to the international markets to issue a new bond until the end of next calendar year so it will not be in this fiscal year,” he said.

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