Daily Times

Prime Minister Shehbaz Sharif’s government is actively pursuing a new International Monetary Fund (IMF) bailout amounting to $6 to $8 billion under the Extended Fund Facility (EFF). Sources disclosed to Geo News on Thursday that the provinces have agreed to the IMF’s stipulation for implementing an agricultural income tax.

According to insiders, separate virtual negotiations were conducted between the IMF and the governments of Sindh, Punjab, Balochistan, and Khyber Pakhtunkhwa, alongside officials from the federal finance ministry. The provinces have requested a two-day extension from the IMF to devise a strategy for imposing taxes on agricultural income.

The Finance Bill 2024, which became effective on July 1, introduces a daunting tax revenue target of Rs13 trillion, aligning Pakistan’s fiscal policies with IMF directives. This ambitious goal includes a 48% surge in direct taxes and a 35% increase in indirect taxes compared to revised estimates from the current fiscal year.

The burden of these tax hikes is expected to predominantly affect salaried individuals and some formal sector businesses, while the budget outlines stringent penalties for tax evaders, such as restrictions on mobile phone services, utility access, and international travel privileges.

Finance Minister Muhammad Aurangzeb has emphasized the necessity of broadening the tax base to sustain future IMF programs, underscoring that increased tax revenues are crucial for Pakistan’s economic stability.

Sources indicate that the proposed agricultural income tax would apply to incomes exceeding Rs600,000 per annum, with rates aligned with other tax categories. As discussions progress between the provinces and the federal government, provincial authorities have assured full cooperation with the IMF, pledging to submit their agricultural tax implementation plan by July 12.

Additionally, finance ministry sources report positive interactions between the IMF and the Khyber Pakhtunkhwa government led by Chief Minister Ali Amin Gandapur, commending the province’s surplus budget of Rs100 billion presented earlier this year.