The International Monetary Fund (IMF) has yet to decide on Pakistan’s request for tax relief measures in the upcoming budget scheduled for June 2, as authorities continue discussions on practical steps to implement agriculture income tax and improve taxation in the retail sector.
Dawn reported, citing sources, that the government has pledged to compensate for any revenue shortfall by reducing expenditures under the Public Sector Development Programme (PSDP) for the current fiscal year. The budget is also expected to include increases in petroleum levies and the introduction of a carbon levy on petroleum and other energy products.
The government has committed to withholding PSDP disbursements to cover any revenue gaps and anticipates additional tax collection through the resolution of ongoing litigation cases.
The Fund acknowledged this commitment, highlighting Rs367 billion in disputed cases out of a total Rs770 billion pending, including Rs43 billion before the Supreme Court, Rs217 billion in various high courts, and Rs104 billion in the Appellate Tribunal Inland Revenue.
The IMF noted that a favorable Supreme Court ruling could potentially settle cases involving an estimated Rs120 billion.
Pakistani officials from the Ministry of Finance and the Federal Board of Revenue (FBR) have held talks with the IMF mission, which has been engaged in budget discussions since mid-May. One proposal under consideration is a 2.5% average cut in income tax rates across all salaried income brackets.
However, this relief depends on the IMF staff being satisfied with the government’s overall revenue plan, which must support the programme’s target of a 1.6% primary budget surplus—equivalent to around Rs2.1 trillion. An official source said that budget targets remain under negotiation and no final decisions have been made.
Datasheets and financial projections aligned with the budget framework reviewed in the recent biannual IMF review have been shared. Responses to the Fund’s queries are being compiled, with the IMF’s stance on the revenue and expenditure strategy expected once the data is analysed through its software tools.
Contrary to some reports, the IMF has neither accepted nor rejected the proposed relief measures. Formal discussions on tax proposals for the real estate sector have yet to begin.
Meanwhile, the government’s “Tajir Dost” scheme aimed at retailers has not achieved expected results and is likely to be replaced by a more effective revenue collection mechanism.
The IMF has also stressed the need to reduce provincial expenditures and boost provincial revenue contributions as part of fiscal discipline and the national fiscal pact’s implementation.
