World Bank accepts govt request
TAHIR AMIN
ISLAMABAD: The World Bank has accepted the government’s request for the extension of closing date and restructuring of the “Pakistan Raises Revenue (PRR)” project worth $400 million.
The bank through a letter communicated to the government that after due consideration, the International Development Association (IDA) has agreed to the request and consequently, the financing agreement is amended, besides the closing date is extended by one year to June 30, 2025. The government has sought one year extension in PRR project worth $400 million financed by the World Bank to revise selected project development objective indicators to enhance attribution and to delink from measurements that no longer exist, it is learnt.
As per the Ministry of Economic Affairs restructuring paper proposes to: (i) extend the duration of the project by one year to June 30, 2025, to ensure adequate time for the completion of the IPF component of the project; (ii) revise selected PDO indicators to enhance attribution and to delink from measurements that no longer exist; (iii) revise select DLIs and IRIs to reflect the extended project duration; and (iv) revise select DLIs and verification protocols to reflect developments not envisioned during the design of the project.
PDO indicators include, (i) Tax-to-GDP ratio (Percentage) while the proposed changes is; changed to increase in FBR’s total collections as percentage of GDP from 8.5 per cent of GDP in fiscal year 2023 to 8.8 per cent in fiscal year 2025 to enhance attribution and better capture implementing agency’s efforts. Accordingly, the targets are updated. (ii) Hours to prepare, file and pay/withhold CIT and GST measured by ‘paying taxes indicator’ in Doing Business (excluding social security contributions) while the proposed changes are; Doing Business (DB) Report is no longer published by the World Bank. The methodology to measure progress on this indicator is changed from DB report to using case study approach to capture progress. (iii) Hours spent for customs clearance at the border per the ‘trading across borders’ Doing Business indicator (average of exports, imports) while the proposed changes are; Doing Business (DB) Report is no longer published by the World Bank. The methodology to measure progress on this indicator is revised to use real time data on Goods Declarations cleared in 48 hours or two working days. The indicator name has also been changed to “Efficiency in custom clearance of key exports and imports”.
The PRR is a five-year Investment Project Financing (IPF) project of $ 400 million with a results-based component and an IPF component. The results-based component ($ 320 million, or Component 1) disburses against documented execution of eligible expenditures under the Eligible Expenditure Programs (EEPs) and the achievement of the Disbursement Linked Indicator (DLI) targets. These DLIs are linked with four objective areas: (i) simple and transparent tax system, (ii) effective control of taxpayers’ obligation, (iii) facilitation of compliance, and (iv) institutional development for efficiency and accountability. The IPF component ($ 80 million, or Component 2) mainly focuses on investment in Federal Board of Revenue’s (FBR’s) ICT systems, including ICT equipment and software, and cargo weighing, contactless scanning, and laboratory equipment for customs inspections (goods). It also finances consulting and non-consulting services for software development, technical assistance (TA) and training.
The project is currently rated as satisfactory against progress towards the achievement of its development objective. It is currently rated as Satisfactory for progress towards achievement of Project Development Objectives (PDO). So far, the project has disbursed US$291.31 million, which is about 74 percent of the total project amount of US$400 million. Recent mid-term review and implementation support missions have found notable achievements under the results-based component on several DLIs as well as progress on the implementation of the IPF component. However, some PDO indicators need to be updated to reflect data availability and enhance attribution.
Overall progress is as; Simple and transparent tax system (DLIs 1, 2, 3). The number of withholding tax lines have reduced from the baseline of 58 in fiscal year 2019 to 33 in the fiscal year 2022 (DLI-1). The FBR has established and staffed Directorate General for Revenue Analysis with qualified economists. With the help of this team, FBR has published the detailed tax expenditure and evidence-based revenue forecasts during 2020-22, and published the tax gap analysis report in 2022 (DLI 2). This has been done for the first time in the history of the FBR, supporting enhanced transparency of the tax system. Furthermore, all four provinces have signed MoUs for data sharing with the Federal Board of Revenue (FBR), as well as MOUs for input adjustments in sales tax and have adopted FBR’s valuation tables for immoveable properties (DLI 3).
