The government has started deliberations on reducing tax rates in the property sector to stimulate business activity, according to sources within the Federal Board of Revenue (FBR). Efforts are underway to convince the International Monetary Fund (IMF) to approve the proposed tax cuts. The move is aimed at revitalizing the property market, which has seen a significant slowdown due to high tax rates.

Officials stated that, under IMF pressure, a bill could be introduced to reduce tax rates instead of increasing them. The government plans to propose a reduction in property tax rates to the IMF, arguing that the current average tax rate of 11-12 percent on property transactions is excessively high. This has led to a sharp decline in property transactions, which have dropped by nearly half. The proposed tax cuts aim to revive the property sector and encourage economic activity.

FBR officials revealed that the first half of the fiscal year has witnessed a significant tax revenue shortfall. Against the annual tax target of Rs. 12,970 billion, the government was expected to collect Rs. 6,009 billion in the first half. However, achieving this target now seems impossible. The authorities are working to limit the shortfall to below Rs. 500 billion.

Despite the revenue shortfall, the tax-to-GDP ratio has reached 10.3 percent, close to the target of 10.6 percent. Officials noted that the primary balance target has also been met, which is why the IMF is not exerting significant pressure on the government for a mini-budget.

The revenue shortfall has been attributed to incorrect budget estimates for inflation and imports. Inflation, initially projected at 12 percent, has averaged only 4.9 percent, while imports, expected to grow by 16 percent, recorded a growth of just 4.48 percent in the first five months. Lower-than-expected inflation and import growth have negatively impacted tax revenues, particularly from imported goods.

The government believes that reducing tax rates in the property sector will help revive business activity and increase transactions. Officials highlighted that the high tax rates have discouraged property investments, leading to a slowdown in the sector. By lowering taxes, the government aims to attract more investors and boost economic activity in related industries such as construction and real estate.