Provinces 'accede' to IMF's demand for tax on agri income

ISLAMABAD: As Pakistan looks to secure another International Monetary Fund (IMF) programme, provincial governments have accepted the lender's demand seeking imposition of tax on agricultural income, sources told Geo News on Thursday.

The sources say that the Fund held separate virtual negotiations with the Sindh, Punjab, Balochistan, and Khyber Pakhtunkhwa governments, also attended by officials of the federal finance ministry with the provinces requesting two-day's time to formulate a plan for enforcing agricultural income tax.

Prime Minister Shehbaz Sharif-led government, in the tax-heavy Finance Bill 2024 which came into effect on July 1, has set up a challenging Rs13 trillion tax revenue target in its attempt to tailor its financial policies in accordance with the IMF's requirements.

The rise in the tax target is made up of a 48% increase in direct taxes and a 35% hike in indirect taxes over revised estimates of the current year.

The tax rises will mostly fall on salaried workers, who comprise a relatively small part of Pakistan’s mostly informal economy, as well as some retail and export businesses. The budget also threatened punitive measures for tax avoiders, including restrictions on mobile phones, gas and electricity access and the ability to fly abroad.

Finance Minister Muhammad Aurangzeb has repeatedly argued for expanding the tax net, as according to him, the expected IMF programme won't be the country's last if the tax revenues do not increase.

Sources say that the tax would be imposed on agricultural income exceeding Rs600,000 per annum and its rate would be like that of other taxes.

With the provinces and the centre expected to reach a consensus on the said issue, the provincial governments have reassured of their full cooperation to the Washington-based lender and will submit their plan regarding agriculture income tax to the IMF tomorrow (July 12).

Furthermore, finance ministry sources have said that Chief Minister Ali Amin Gandapur-led KP government has also held positive talks with the Fund wherein the latter appreciated the provincial government's Rs100 billion surplus budget tabled in May earlier this year.