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Tuesday, July 16, 2024

IMF Urges Tax Overhaul in Pakistan: Agriculture, Real Estate, and Retail Sectors Targeted

The Federal Board of Revenue (FBR) submitted a revenue report, and the IMF mission team is set to respond in two days.

The International Monetary Fund (IMF) has recommended that Pakistan impose additional taxes on the retail, real estate, and agricultural sectors, urging stricter enforcement of real estate tax and proposing fixed taxes on retailers to bridge potential shortfalls in tax revenue.

Technical-level talks between Pakistan and the IMF continued, with the lender suggesting the imposition of taxes on retailers after December, emphasizing the need for consultation with provinces regarding taxes on agriculture. The Federal Board of Revenue (FBR) submitted a revenue report, and the IMF mission team is set to respond in two days.

In a bid to fast-track the ongoing review, talks with the IMF, initiated on November 2, 2023, play a crucial role. If Pakistan’s performance satisfies the lender during the review, a second tranche of $700 million is anticipated to be disbursed, holding significant implications for the country’s economic stability.

IMF and FBR Discuss Tax Collection Strategies

During the ongoing review, the IMF has engaged Pakistani authorities on a tax collection plan, specifically targeting agriculture, real estate, and retail sectors. The talks involved identifying areas for bridging financing shortfalls and potential measures if the Federal Board of Revenue fails to meet the tax collection target.

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While the FBR contemplates a fixed tax on retailers, the IMF expresses reservations, demanding a timeframe from provinces for bringing the agriculture sector into the tax net.

The IMF also received briefings on the Tax Policy and Management Task Force, urging Pakistan to achieve its tax collection target. With ongoing parleys between Pakistan and the IMF high-ups, led by Caretaker Finance Minister Dr Shamshad Akhtar and IMF’s Mission Chief Nathan Porter, the outcome of this review will determine the disbursement of the second tranche.

Finance Minister Rules Out Expansion of IMF Program

As discussions unfold, Finance Minister Dr Shamshad Akhtar ruled out any possibility of requesting an increase in the timeframe or size of the $3 billion stand-by arrangement (SBA) program.

The talks, slated to conclude on November 15, 2023, involve crucial decisions about the financial support that Pakistan will receive from the IMF. The Finance Minister’s clear stance sets the tone for the country’s commitment to the existing program without seeking alterations in its terms or size.