Business
IMF Urges Pakistan to Implement Anti-Tax Fraud Measures
The International Monetary Fund (IMF) has recommended that Pakistan implement the General Anti-Avoidance Rule (GAAR) to combat tax fraud in the General Sales Tax (GST) system.
This move aims to address fraudulent practices that cost the government trillions annually.
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The proposed rule would prevent businesses from claiming input tax on purchases involved in fraudulent schemes, which are estimated to result in annual losses of up to Rs. 3 trillion due to fake invoices and tax evasion.
The IMF’s Technical Assistance report highlights trader fraud in sectors like construction and raw material processing as a significant contributor to lost sales tax revenue.
To address this, the report suggests amendments to the Sales Tax Act and the Income Tax Ordinance, including:
- Limiting deductions for interest payments to foreign entities to prevent profit shifting
- Introducing a well-designed GAAR to counter tax avoidance
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It’s worth noting that previous efforts to introduce unified tax laws, led by former PM Imran Khan’s government, were abandoned and not implemented.
