Pakistan-IMF Talks Focus on Taxation and Privatization

ISLAMABAD: The second phase of economic review talks between Pakistan and the International Monetary Fund (IMF) is currently underway, with key discussions focusing on the imposition of income tax on agricultural earnings, as part of the IMF’s conditions for Pakistan’s economic stability.

Government officials informed the IMF that agricultural income would be taxed at a rate similar to the corporate sector, set at 45%. However, there are specific thresholds and rates for various income brackets. According to official documents, no tax will be imposed on annual agricultural income up to Rs600,000. For income between Rs600,000 and Rs1.2 million, a 15% tax will apply. Income between Rs1.2 million and Rs1.6 million will be subject to a fixed tax of Rs90,000, with an additional 20% tax for earnings above Rs1.2 million.

For income between Rs1.6 million and Rs3.2 million, a fixed tax of Rs170,000 will apply, along with a 30% tax on income exceeding Rs1.6 million. Similarly, agricultural income ranging from Rs3.2 million to Rs5.6 million will incur a fixed tax of Rs650,000, with an additional 40% tax on income exceeding Rs3.2 million. Any agricultural income above Rs5.6 million will be taxed at a fixed rate of Rs1.61 million, plus a 45% tax on earnings beyond this threshold.

The IMF review mission has urged Pakistan to address the technical challenges related to tax collection and has requested a detailed plan from provincial revenue authorities on how to implement these tax measures.

In addition to the agricultural tax reforms, the Pakistani government has presented its privatization plan to the IMF delegation. The government’s priorities include the sale of Pakistan International Airlines (PIA), power distribution companies (DISCOs), various banks, and the House Building Finance Corporation (HBFC).

As part of efforts to fulfill IMF conditions, the government also briefed the delegation on progress related to the National Finance Pact and the enforcement of the super tax.

Read more: Pakistan and IMF Resume Talks on Power Sector Reforms and Electricity Tariffs

The ongoing talks reflect Pakistan’s commitment to meeting IMF requirements, while addressing key issues within the country’s economy to ensure long-term stability.