Pakistan has approved a $200 million loan from the Asian Development Bank (ADB) for the digitalisation of revenue administration, despite serious questions raised by the Planning Commission. The decision came on Friday when the Central Development Working Party (CDWP) cleared seven projects worth Rs116 billion, including the Rs57 billion Transforming and Digitalising Revenue Administration (TADRA) project.
The CDWP meeting, presided over by Planning Minister Ahsan Iqbal, conditionally approved the TADRA project, which aims to increase the tax-to-GDP ratio to 13.5 percent by 2029 from the current 11.1 percent. The approval was necessary to secure the $200 million ADB loan, which the bank’s management had already committed and which required formal approval by its board. The loan is part of the ADB’s Investment Project Financing under its Ordinary Capital Resources concessional window, carrying a 25-year term with a five-year grace period and an annual interest rate of 1.5 to 2 percent.
However, the digitalisation of revenue administration project faced scrutiny from the Planning Commission, which raised objections and demanded an impact assessment of previous reform interventions. The commission pointed out that approximately $4.7 billion had already been obtained from development partners to reform Pakistan’s tax system, yet the tax-to-GDP ratio remains around 11 percent. It called for a thorough review of the business model by the Pakistan Institute of Development Economics (PIDE), a state-owned think tank, and an impact assessment of four major loan programmes for the Federal Board of Revenue (FBR): the Tax Administration Reforms Programme, Pakistan Single Window, Integrated Transit Trade Management System, and Pakistan Raises Revenue Project.
Planning Minister Ahsan Iqbal stressed the need for clearly defined and measurable outcomes, particularly in terms of revenue generation, improvement in the tax-to-GDP ratio, and expansion of the taxpayer base. The FBR assured that the loan would contribute to increasing the tax-to-GDP ratio to 13.5 percent by 2029 and bring more taxpayers into the tax net. The project is part of the FBR’s 2024-28 Transformation Plan, which aims to accelerate the digitalisation of the revenue administration ecosystem, enhance operational efficiency, improve taxpayer compliance, ensure transparent customs clearance, and elevate Pakistan’s global competitiveness.
Despite these assurances, the Planning Commission had reservations that the project should not proceed without an impact analysis of already executed projects, a gap analysis of existing facilities, a needs assessment, and a feasibility study. It also called for quantifiable results-based measurement indicators and a plan to ensure the sustainability of the project’s activities after its completion. External experts from the National University of Computer and Emerging Sciences and the National University of Sciences and Technology also highlighted concerns.
In conclusion, while the $200 million ADB loan for the digitalisation of revenue administration has been greenlit, the conditional approval and the Planning Commission’s demands for thorough reviews underscore the need for accountability and measurable results in Pakistan’s ongoing efforts to reform its tax system.
Source: Dawn News