The visiting International Monetary Fund (IMF) mission is set to meet with representatives from the provincial governments today to discuss the implementation of various fiscal policies, as well as review progress in implementation of up to 45% tax on agricultural income.
The provincial governments had until October 31 to enact legislation for the agricultural income tax, with tax collection scheduled to begin on January 1, 2025. However, none of the provinces met the deadline.
While the Punjab cabinet has approved the bill and Khyber Pakhtunkhwa has prepared a draft, Sindh and Balochistan have yet to make progress on this legislation regarding tax on agricultural income, according to sources.
The IMF team will be briefed on the reasons behind these delays, as all four provinces have signed the National Fiscal Pact as per IMF conditions.
Sources from the Ministry of Finance note that under the IMF agreement, certain federal expenses -- such as higher education, healthcare, social security, and regional infrastructure development -- are expected to be transferred to the provinces. The IMF mission has already highlighted the role of provinces in economic and tax reforms.
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The sources further said that the IMF team will also be briefed on the provincial budget surplus targets. In the first quarter, the four provinces were tasked with achieving a combined surplus of Rs342 billion; however, they could manage only Rs182 billion. Punjab’s budget deficit of Rs160 billion contributed significantly to the shortfall.
On Wednesday, the Federal Board of Revenue (FBR) assured that no mini-budget would be introduced while affirming the government’s commitment to maintain the annual tax target of Rs12,970 billion.
Sources from the FBR also stated that the General Sales Tax (GST) will not be imposed on petroleum products, aligning with ongoing discussions with the IMF.
Sources also indicated that the IMF expressed satisfaction over Pakistan’s recent economic performance, particularly the increase in the tax-to-GDP ratio, which has risen from 8.8% to 10.3% -- a 1.5% improvement seen as a positive indicator of Pakistan's fiscal policies.
