Pakistan Considers to eliminate tax exemptions to meet IMF target

The proposal also reportedly includes a 10% sales tax on essential items like food, medicine, and stationery.

Islamabad, The International Monetary Fund (IMF) has reportedly set a demanding tax target of Rs 12,900 billion for Pakistan’s next financial year. This necessitates a significant increase in tax collection, with sources indicating the government is considering a major overhaul that could eliminate most tax exemptions.

According to sources within the Ministry of Finance, the Federal Board of Revenue (FBR) faces the challenge of collecting an additional Rs 3,490 billion. The IMF’s proposals include doubling the number of income tax filers from 3 million to 6 million and expanding the tax net to include more businesses.

However, the most significant shift may be the potential elimination of tax exemptions on a wide range of goods and services. This could include previously exempt agricultural products, seeds, fertilizers, tractors, and other equipment. Sources suggest full sales tax would be levied on these items under the new plan.

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The proposal also reportedly includes a 10% sales tax on essential items like food, medicine, and stationery. Additionally, a potential 1-2% increase in the general sales tax rate is being considered as a contingency measure if achieving the target proves difficult.

These sweeping changes, if implemented, would represent a major shift in Pakistan’s tax landscape. The government faces the delicate task of balancing the need for increased revenue with the potential impact on businesses and consumers.