ISLAMABAD: IMF is considering granting a waiver regarding the provinces’ delay in collecting Agriculture Income Tax (AIT). As part of this review, the IMF mission has requested detailed updates from provincial revenue authorities on their plans for AIT collection starting July 1, 2025. Additionally, the IMF team has urged provinces to transition the Goods and Services Tax (GST) on services from a positive to a negative list format beginning in the fiscal year 2025-26.
The provinces informed the IMF that the conversion of GST on services from positive to negative list would be implemented as agreed in the National Tax Council (NTC) but the provinces would have to seek approval of their respective cabinets and provincial legislative assemblies which would be sought on the occasion of next budget for 2025-26. The IMF mission sought progress on key points of the National Fiscal Pact, including transition of the services GST from positive list to a negative list approach to combat tax evasion, to take effect from the start of FY2025-26. The IMF also sought details to collectively raise revenues from corporate tax in agriculture and GST on services, combined with provincial tax effort in expanding additional areas of revenue collection.
The International Monetary Fund (IMF) has urged the implementation of a unified approach to property taxation, advocating for the necessary administrative reforms to reduce the tax compliance gap, particularly concerning the Goods and Services Tax (GST). Additionally, the IMF has requested comprehensive information on the terms of reference for the National Tax Council, which will be expanded to encompass the formulation of relevant tax measures, inclusive of property tax, alongside the associated legal and administrative modifications required for execution.
Notably, esteemed economist Dr. Hafiz A. Pasha has assessed the potential revenue generation from Agriculture Income Tax (AIT) across all provinces, estimating it could reach Rs880 billion. In his most recent research paper, Dr. Pasha highlights that the overall provincial tax-to-GDP ratio for the four provinces is surprisingly low, standing at just 0.7 percent of GDP. Among the provinces, Sindh leads with the highest tax-to-GRP ratio of 1.2 percent, while Khyber-Pakhtunkhwa trails behind with a ratio of less than 0.4 percent.
