IMF Highlights Provincial Tax Reforms and Harmonization Efforts in Pakistan
The International Monetary Fund (IMF) has acknowledged that all four provincial governments in Pakistan are actively working toward a harmonized property tax framework set to begin in the fiscal year 2025-26. This will involve transitioning from the current rent-based valuation system to a capital valuation framework, aiming to modernize and improve tax equity.
Read More: https://theneutral.pk/imf-warns-pakistan-requires-115-billion-in-external-funding-by-2030/
Key points from the IMF report include:
- Agriculture Income Tax Alignment: By the end of October 2024, provinces have amended their Agriculture Income Tax (AIT) regimes to fully align with federal personal income tax rules for small farmers and corporate income tax for commercial agriculture. These changes will apply to income earned from January 1, 2025, with tax collection starting in September 2025 for the second half of FY25.
- Implementation Support: Working alongside the IMF and World Bank, provinces are developing detailed plans for effective enforcement, compliance strengthening, and targeted communication to identify under-reported income and ensure smooth rollout of new tax rules.
- GST Transition: Provinces are shifting from a positive list to a negative list approach for the Goods and Services Tax (GST) on services, effective FY26. Although the negative list varies by province due to local circumstances, it primarily exempts essential services such as health, education, and government services.
- Upcoming Discussions: The ongoing property tax harmonization efforts and other provincial tax reforms will be key agenda items at the National Tax Council meeting planned for early April 2025.
This comprehensive reform aims to broaden Pakistan’s tax base, enhance tax fairness, and improve revenue collection across provinces.
