IMF pushes for tax target of over Rs 15 trillion in Pakistan's next budget

Islamabad: The International Monetary Fund has (IMF) proposed a tax target of over Rs 15 trillion for Pakistan in the next budget, according to a media report on Saturday.

The development comes days after the IMF urged Pakistan’s Special Investment Facilitation Council (SIFC) to refrain from granting tax exemptions to international investment projects, including the Chaghi-Gwadar railway track project worth $2 billion.

ARY News reported citing sources that the IMF delegation maintained that tax exemptions for international investments would hinder the country’s revenue generation.

The IMF and Pakistan are holding virtual talks, with 85 per cent of the discussions completed successfully. The talks are focused on finalising the details of the next budget, which is expected to be presented in the National Assembly soon.

The new budget is expected to increase the tax-to-GDP ratio to 13 per cent and collect Rs 2,745 billion in non-tax revenue. The government is also expecting the economy to grow by over 4 per cent in the next fiscal year, driven by increased investment and consumption.

The government had requested Gulf countries to invest in the Chaghi-Gwadar railway track project, but the IMF has refused to grant tax exemptions to the SIFC for international investments.

The SIFC has been providing a platform for investment and facilitating the transportation of minerals from Reko Diq to Gwadar through a new railway line.

Briefing the IMF delegation, officials stated that a platform is being provided to facilitate investment, and a new railway line will be constructed to transport minerals from Reko Diq to Gwadar, according to the ARY News report.

Pakistan set Rs 12.97 trillion tax collection target for the fiscal year 2024-25 but the Federal Board of Revenue (FBR) has been facing challenges to meet the target.

Any increase in the tax collection for the next fiscal starting from July would increase the burden on the people.

Finance Minister Muhammad Aurangzeb on Friday told media that Pakistan hopes to receive positive news from the IMF as the global lender moves towards the conclusion of talks in securing the next tranche of USD 1 billion out of the $7 billion loan package agreed last year.

The minister also reassured that Pakistan was on track to meet the IMF’s economic discipline targets after an IMF delegation visited the cash-strapped country this month and met various officials.