Pakistan has resisted proposals by the International Monetary Fund (IMF) to set a Rs15.6 trillion tax collection target for the next fiscal year and withdraw sales tax exemptions on fuel and newly constructed homes, reported Express Tribune.
The recommendations surfaced during recently concluded staff-level talks between Islamabad and the Washington-based lender ahead of negotiations on the fiscal year 2026-27 budget, beginning in July. Officials said the government has so far not agreed to the proposals.
Under the IMF’s framework, Pakistan would need to introduce at least Rs400 billion in additional revenue measures to raise the tax-to-GDP ratio to about 11.3pc next year, roughly 0.3 percentage points higher than the current year’s agreed target. However, tax authorities estimate collections may reach only around 10.7pc of GDP, leaving a significant gap.
Officials said the IMF had also proposed withdrawing or reducing sales tax exemptions on fuel and newly constructed homes as part of efforts to broaden the tax base. The government is reluctant to impose general sales tax on petroleum products because such revenues are shared with the provinces, unlike the petroleum levy — currently around Rs106 per litre on petrol — which is retained entirely by the federal government.
Another proposal under discussion included imposing 18pc sales tax on existing rooftop solar consumers who were earlier exempted when the government shifted from net metering to net billing regulations. Officials said the issue could again come under discussion during the next round of talks with the IMF scheduled for May.
The IMF also floated the idea of introducing an asset-based tax on small and medium-sized enterprises, including traders. However, the Federal Board of Revenue (FBR) expressed reservations, citing limited administrative capacity to determine the asset base of small-scale businesses.
Pakistan reached a staff-level agreement with the IMF last week, but final approval by the lender’s executive board remains linked to the government’s ability to recover Rs322bn in taxes from court cases already decided in its favour. Officials said about Rs280bn had so far been recovered.
Meanwhile, uncertainty persists over whether the FBR will meet its revised Rs13.98tr tax target for the current fiscal year, raising concerns about the feasibility of achieving next year’s proposed Rs15.6tr goal.
The IMF has emphasised that Pakistan must maintain a primary budget surplus of about 2pc of GDP in the next fiscal year, supported by permanent tax policy measures. Officials said any reduction in tax rates for businesses or other sectors, as sought by the government, would need to be offset by new revenue measures, including the possibility of increasing the standard sales tax rate.
