IMF wants Pakistan to ‘contribute more’

• The IMF held separate virtual meetings with provincial governments.
• The provinces pledged their full support for agricultural income tax.
• Income exceeding Rs 6 lakh per year will be taxed.
  

ISLAMABAD: As Prime Minister Shehbaz Sharif’s government tries to secure a fresh bailout of $6 billion to $8 billion from the International Monetary Fund (IMF) through the Extended Fund Facility (EFF), provinces have agreed to the lender’s demand for agricultural income tax, sources said. Geographic News Thursday.

Sources said the fund held separate virtual talks with the governments of Sindh, Punjab, Balochistan and Khyber Pakhtunkhwa provinces, attended by officials from the federal finance ministry, during which the provinces asked the fund to give them two days to work out a plan to tax agricultural income.

In the tax-intensive Finance Bill 2024, which came into effect on July 1, the government set a challenging tax revenue target of 1.3 trillion rupees as it seeks to align its fiscal policy with the IMF’s requirements.

The increase in tax collection targets includes a 48% increase in direct taxes and a 35% increase in indirect taxes compared to this year’s revised estimates.

The tax increases target mainly salaried workers, who make up a small part of Pakistan’s informal economy, as well as some retail and export businesses. The budget also threatens punitive measures against tax evaders, including restrictions on mobile phones, gas and electricity supplies, and foreign flights.

According to Finance Minister Mohammad Aurangzeb, who has repeatedly advocated for widening the tax net, the expected IMF program will not be the last for the country if tax revenues do not increase.

Sources said the tax will be levied on agricultural income exceeding Rs 6 lakh per year at the same rate as other taxes.

The provinces and the Centre are expected to reach a consensus on the issue and the provincial governments have assured the Washington-based lender of their full cooperation and will submit their plans on agricultural income tax to the IMF tomorrow (July 12).

Besides, sources in the finance ministry said that the Khyber Pakhtunkhwa provincial government, led by Chief Minister Ali Amin Gandapur, also held positive talks with the fund, which appreciated the Rs 100 billion surplus budget presented by the provincial government in May this year.