ADB approves additional $200m loan for revenue administration

The Asian Development Bank (ADB) has asked Pakistan to expand its narrow tax base and approved an additional $200 million loan to modernise the country’s revenue administration.

ISLAMABAD: The Asian Development Bank (ADB) has asked Pakistan to expand its narrow tax base and approved an additional $200 million loan to modernise the country’s revenue administration.

On Thursday, addressing a Dialogue on Tax and Fiscal Sustainability in Pakistan, the ADB’s visiting Vice President for South, Central and West Asia, Yingming Yang, stated that the Transforming and Digitalising Revenue Administration Project was expected to be considered by the bank’s board this year.

The project would support implementation of the transformation agenda through investment in digital infrastructure, modernisation of tax and customs systems, advanced data analytics, artificial intelligence-enabled compliance, stronger cybersecurity and institutional development.

He said Pakistan had reached an important stage in its economic reform journey after making considerable progress in maintaining macroeconomic stability and strengthening resilience under challenging circumstances.

“Pakistan’s tax reform agenda is gaining momentum,” he said.

He added that if implemented successfully, the reforms could strengthen compliance, improve services for taxpayers, reduce discretionary interventions and enable the FBR to use integrated data and risk-based approaches for revenue mobilisation.

The ADB official said domestic resource mobilisation should not be seen merely as a fiscal target because stronger revenues enabled governments to invest in people, infrastructure, public services and economic resilience.

He identified the narrow tax base, widespread informality and low compliance as major challenges confronting Pakistan’s revenue system.

The vice president said the ADB had placed domestic resource mobilisation at the centre of its engagement with Pakistan.

He welcomed the establishment of the Tax Policy Office within the Ministry of Finance, saying it could strengthen analytical capacity and promote evidence-based tax policymaking. An efficient system should have a broad tax base and limited exemptions to reduce economic distortions, lower compliance costs and support private-sector growth, he said. A fair system should distribute the tax burden more evenly, protect vulnerable sections of society and reflect each taxpayer’s capacity to pay.