- According to Finance Minister Dar, the government has fulfilled all the previous requirements set by the IMF.
- “We have faced considerable challenges in fulfilling the IMF’s conditions.”
- He also affirms, “There will be no additional burden on the people.”
In a recent announcement, Finance Minister Ishaq Dar assured the public that the coalition government has no intentions of imposing new taxes on the agriculture and real estate sectors. Despite implementing strict measures that have burdened the masses, the government is determined not to add any additional taxes to these sectors.
The Finance Minister emphasized, “I want to state categorically […] that no new tax will be imposed on agriculture or real estate. We have endured much pain in meeting the IMF’s conditions,” during a session in the National Assembly.
The International Monetary Fund (IMF) had approved a $3 billion bailout program for Pakistan, out of which $1.2 billion was immediately disbursed, providing much-needed stability to the nation’s struggling economy.
Media reports had suggested that the IMF had requested the government to devise a plan to impose taxes on the real estate and agricultural sectors as a condition to release the remaining bailout amount. This sparked concerns among those involved in the agriculture sector. However, the Finance Minister assured that the government had fulfilled all prior requirements set by the lender, and the agreement with the IMF was conducted transparently.
Dar further reassured the public that no further financial burden would be imposed on the people, and all commitments made with the IMF are accessible on the finance ministry’s website.
The bailout deal has already brought some relief to investors in Pakistan’s stocks, exchange rates, and bonds and is expected to unlock more external financing. To support the country, longtime allies Saudi Arabia and the United Arab Emirates have deposited $3 billion in Pakistan’s central bank in the last two days. Additionally, China has extended loans worth $5 billion in the last three months to prevent a default.
While the Finance Minister stands firm on the decision not to impose new taxes on agriculture and real estate, some experts believe that these sectors are currently under-taxed in the country.
Economist Khaqan Hassan Najeeb, a former adviser to the finance ministry, pointed out that both agriculture and construction, as noted by the IMF, remain under-taxed sectors in Pakistan. He believes that taxing these sectors appropriately could help broaden the tax base and promote progressivism in the nation’s economy.
Regarding the real estate sector, Najeeb suggests considering a true capital gains tax, levied at the marginal income tax rate of the individual making the capital gains over the years. This approach could encourage investment in more productive sectors like manufacturing, diverting funds from unproductive real estate.
However, Najeeb acknowledged that such changes would require the efforts of a long-term new government, which could potentially take office after the upcoming elections. Furthermore, he pointed out that the provincial governments hold the authority over the agriculture income tax, which currently contributes insignificantly to the revenue. To address this, provinces should contemplate implementing a progressive income tax on agriculture, considering the size of farm holdings.
Read more: IMF Urges Pakistan to Impose Taxes on Real Estate and Agriculture for Revenue Generation
In conclusion, Finance Minister Ishaq Dar has made it clear that there will be no new taxes imposed on the agriculture and real estate sectors despite the IMF’s conditions for the bailout program. While the decision aims to ease the burden on the masses, some experts believe that a fair taxation system in these sectors could help boost the economy in the long run. As Pakistan moves forward, striking a balance between financial stability and equitable taxation will be crucial for sustainable economic growth.
