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Bad News For Pakistan After IMF Rejects FBR’s Request To Reduce Transaction Taxes For Property Sector

In addition, the IMF has refused to reduce tax rates for tobacco and beverages and has now rejected the FBR's request to cut tax rates for the property sector.

It came as bad news for Pakistan after the International Monetary Fund (IMF) rejected its Federal Board of Revenue’s (FBR) request to reduce transaction taxes for the property sector.

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The News International reported that the IMF was in no mood to lower the transaction taxes for the property sector for the time being which was requested by the nation.

Earlier, Pakistan’s senior officials had claimed that the IMF had agreed to reduce the withholding tax on property purchasers by 2 per cent from April 1, 2025, subject to written approval from the IMF. However, the IMF has now officially announced that it has not agreed to lower the transaction taxes for property.

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In addition, the IMF has refused to reduce tax rates for tobacco and beverages and has now rejected the FBR’s request to cut tax rates for the property sector. Meanwhile, Pakistan and the IMF are moving towards finalising a Staff Level Agreement (SLA). However, Pakistan will have to provide written assurances to the IMF that the provinces will not intervene in wheat procurement.

The global lender has expressed its willingness to augment the existing USD 7 billion Extended Fund Facility (EFF) with climate finance under the Resilience and Sustainability Facility (RSF). This proposal will be presented to the IMF’s Executive Board for approval alongside Pakistan’s request for the release of the second tranche, The News International reported.

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The exact size of the funding under the RSF is not yet known, but it is expected that up to USD 1 billion will be provided under the Climate Resilience Fund (CRF). Pakistan’s Finance Minister Muhammad Aurangzeb expressed hope on Friday that both sides would soon finalise the Staff Level Agreement.

The IMF’s Resident Chief in Pakistan Mahir Binci said, “The IMF has not agreed on a lower withholding tax on property transactions and on lowering March 2025 targets,” The News International reported.

On reducing the March 2025 tax collection target, the official sources said that the FBR could not achieve the ongoing monthly target at any cost and whether IMF agrees or not, it would experience a shortfall in achieving the desired target of Pakistani Rupees (PKR) 1,220 billion for this ongoing month.

According to the FBR’s internal assessment, revenue collection could decline by PKR 60 to 80 billion due to an increased number of holidays at the end of the month for Eid-ul-Fitr. As a result, Pakistan’s Ministry of Finance and the IMF were advised that this shortfall of PKR 60-80 billion should be adjusted in the revenue collection targets for April and May 2025, rather than June 2025, w

HISTORY

Written By

Vikas Mehta


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