HMRC advisers to help Pakistan lift its tax take

  • @NigelpMorris

Experts from HM Revenue & Customs are preparing to fly to Pakistan to advise its government on collecting more taxes – which could eventually end its need for British foreign aid.

Pakistan has one of the lowest tax collection rates in the world, and even many of its politicians are believed not to contribute a rupee towards the national coffers.

Justine Greening, the International Development Secretary, believes that helping the country to raise more tax could have a benefit for Britain, as it would enable the UK Government to scale back aid payments.

The scheme is also designed to reassure Tory backbench critics of the Coalition's aid programme that it is tackling genuine need and is not simply bailing out incompetent administrations in the developing world.

Pakistan is currently the biggest recipient of British aid and is due to receive £412m this financial year, rising to £446m in 2014-15. In addition, Pakistani families receive about £1.5bn a year in remittances from relatives working in Britain.

The Department for International Development (DfID) is setting up a team with HMRC to provide detailed advice to foreign governments on increasing tax collection levels – with Pakistan its top priority. Officials are likely to fly to the country by the summer.

A source told The Independent: "Improving Pakistan's tax base could bring in billions and could eventually end the need for development support. It's not sustainable for British taxpayers to give development assistance, or British Pakistanis to send billions in remittances, if Pakistan is not doing enough to raise its own tax revenues."

During meetings with leading Pakistani politicians in January, Ms Greening stressed the need to raise the country's tax collection rate. Sources said she was alarmed at reports that even 70 per cent of the country's politicians failed to complete a tax return.

Ms Greening is due to meet representatives of the country's caretaker government in April and has instructed DfID officials to be ready to work with the new government following elections in May.

David Cameron has made boosting tax collection rates, and tackling abuse of tax systems, a key priority of Britain's presidency this year of the G8 group of the world's most developed economies.