The International Monetary Fund (IMF) has rejected several of Pakistan’s proposed tax measures, including a capital value tax on movable assets such as cash and gold, and a 5 percent federal excise duty (FED) on one-day-old chicks.

While the IMF gave the green light to a new tax on digital services, expected to generate Rs. 10 billion in revenue, it turned down the government’s plan to increase the income tax exemption threshold to Rs. 1.2 million. However, the Fund did support a reduction in income tax rates for individuals earning less than Rs. 500,000 per month. No relief was granted for the highest income tax slab of 35 percent or the 10 percent surcharge on monthly incomes above Rs. 500,000.

The IMF dismissed the capital value tax proposal, arguing that Pakistan should prioritize taxing income rather than wealth. The proposed tax on chicks was also rejected, with the IMF criticizing the move as inconsistent with claims about high food taxation and lacking a comprehensive sector analysis.

Other tax measures under consideration include raising the dividend income tax on mutual funds from 15 percent to 20 percent, and increasing the withholding tax on interest income from 15 percent to 20 percent. The government is also weighing the withdrawal of income tax exemptions for venture capital companies and cinemas.

Additionally, a proposed 5 percent excise duty on processed foods such as chips and biscuits would push the total tax burden on these items to nearly 29 percent when existing taxes are included.

The IMF has also urged Pakistan to double the excise duty on fertilizer to 10 percent and introduce a 5 percent duty on pesticides, despite resistance from the Prime Minister.