The second phase of economic review talks between Pakistan and the International Monetary Fund (IMF) is underway, with discussions focusing on the imposition of income tax on agricultural earnings as part of IMF conditions.
Government officials informed the IMF that agricultural income will be taxed at a rate equivalent to the 45% corporate sector tax. The IMF review mission emphasized the need to address technical challenges in tax collection and has sought a plan from provincial revenue authorities for implementing the tax.
According to official documents, no tax will be applied to annual agricultural income up to Rs600,000. However, income between Rs600,000 to Rs1.2 million will be taxed at 15%. For annual income between Rs1.2 million to Rs1.6 million, a fixed tax of Rs90,000 will be levied. Additionally, annual income exceeding Rs1.2 million will be subject to an additional 20% tax.
For income between Rs1.6 million to Rs3.2 million, a fixed tax of Rs170,000 will be applied, along with a 30% tax on income above Rs1.6 million. Income ranging from Rs3.2 million to Rs5.6 million will incur a fixed tax of Rs650,000, with an additional 40% tax on income exceeding Rs3.2 million. Agricultural income exceeding Rs5.6 million annually will face a fixed tax of Rs1.61 million, while income beyond this threshold will be taxed at 45%.
Regarding corporate farming, small corporate farms will be taxed at 20%, while larger corporate farms will be subject to a 28% tax. A super tax will not be applied on income up to Rs150 million, but a 10% super tax will be imposed on earnings exceeding Rs500 million.
The Pakistani government also presented its privatization plan to the IMF delegation, prioritizing the sale of Pakistan International Airlines (PIA), power distribution companies (DISCOs), banks, and the House Building Finance Corporation (HBFC).
The government briefed the IMF on progress in implementing the National Finance Pact and enforcing the super tax, as part of efforts to meet IMF conditions for economic stability.
