IMF Suggests Imposing More Taxes on Retail, Real Estate, and Agriculture

The IMF has told Pakistan to reduce the types of taxes for working people and businesses from seven to four. If this idea is accepted, it might affect those in the middle and upper middle-income groups.

Last week, the IMF discussed the matter, aiming to more than double tax collection from individuals and businesses, according to government sources. The suggestion came from an IMF technical team that finished a two-week review of Pakistan’s tax policies. The team also proposed raising the reduced sales tax rates to the standard 18%, with some exceptions for essential goods.

Additionally, the IMF is said to have recommended imposing extra taxes on retail, real estate, and agricultural sectors. Talks between Pakistan and the IMF at the technical level continued on Thursday.

The IMF specifically suggested stricter enforcement of real estate tax. In case of a tax revenue shortfall, a fixed tax might be imposed on retailers during the ongoing financial year. The IMF proposed that the tax regulator could use its powers to levy taxes on retailers after December.

The IMF was informed that consulting with provinces is necessary before imposing taxes on the agricultural sector. The Federal Board of Revenue (FBR) submitted a report to the IMF on potential revenue by the end of the current financial year. The IMF mission team will respond to the revenue report in two days.

Furthermore, the IMF was briefed about the Tax Policy and Management Task Force under the tax regulator’s purview. FBR has reportedly finished its work on separating tax policy from enforcement, with a grade-21 officer overseeing finalizing tax policy matters in the Finance division.

The IMF has requested an implementation report on Track and Trace. Talks with the IMF began on November 2, 2023, with both sides sharing critical data to expedite the ongoing review. If the IMF is satisfied with Pakistan’s performance, a second tranche of $700 million is expected to be disbursed. The successful outcome of the review will have significant implications for the country’s economic stability and its ability to secure continued financial support from the IMF.