Negotiations concerning the first review of Pakistan’s $3 billion Standby Arrangement have intensified, with the International Monetary Fund (IMF) calling for the implementation of taxes on the retail, real estate, and agricultural sectors, according to sources from the Federal Bureau of Revenue (FBR).
Ongoing technical-level discussions between Pakistan and the IMF have identified several crucial avenues for addressing the country’s financing needs. The IMF has specifically proposed a more stringent enforcement of real estate taxes. Additionally, in case of a shortfall in tax revenue, a fixed tax may be imposed on retailers during the current financial year. The IMF has recommended that the tax regulator exercise its authority to impose taxes on retailers after December, as per FBR sources.
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It has been emphasized that consultation with the provinces is necessary to impose taxes on the agricultural sector. Meanwhile, the FBR has presented a report to the IMF regarding potential revenue by the end of the current financial year. The IMF mission will respond to this revenue report within two days, according to the sources.
It is worth noting that the IMF was also briefed on the Tax Policy and Management Task Force under the jurisdiction of the tax regulator.
Discussions with the IMF began late last week, with both sides exchanging critical data to expedite the ongoing review. If the IMF is satisfied with Pakistan’s performance during the review, a second tranche of $700 million is expected to be disbursed.
The successful outcome of the review will undoubtedly have significant implications for the country’s economic stability and its ability to secure continued financial support from the IMF.
