The International Monetary Fund (IMF) has turned down the Federal Board of Revenue’s (FBR) request to reduce transaction taxes on the property sector at this time.
Earlier reports suggested that the IMF had, in principle, agreed to cut withholding tax on property purchases by 2 per cent, effective April 2025, pending formal written approval. However, the IMF has now clarified that no such agreement has been made.
This decision follows the IMF’s previous refusal to lower tax rates on tobacco and beverages. The FBR had made one final attempt to secure a reduction in property sector taxes, but the IMF rejected it.
Meanwhile, Pakistan and the IMF are working towards finalising a Staff Level Agreement (SLA), with the IMF requiring written assurances that provinces will not engage in large-scale wheat procurement.
On a positive note, the IMF has shown interest in increasing its $7 billion Extended Fund Facility (EFF) for Pakistan with additional climate finance under the Resilience and Sustainability Facility (RSF).
The size of this funding remains unclear, but estimates suggest it could be up to $1 billion. This, along with the release of the second tranche of funds, will be presented to the IMF’s Executive Board for approval. Pakistan’s Finance Minister, Muhammad Aurangzeb, expressed optimism last week, hoping for a swift conclusion to the SLA.
IMF Resident Representative in Pakistan, Mahir Binci, confirmed that the IMF had not agreed to lower the withholding tax on property transactions or adjust the March 2025 tax targets.
According to sources, the FBR is likely to fall short of its current monthly revenue target of Rs1,220 billion, with a shortfall of Rs60 to 80 billion anticipated due to Eid ul Fitr holidays. The FBR has suggested shifting the shortfall to April and May, rather than June 2025, when tax collection is expected to increase.
