The International Monetary Fund (IMF) has asked Pakistan’s provinces to generate more than Rs400 billion in additional revenue in the upcoming federal budget.
Federal Minister for Finance and Revenue Muhammad Aurangzeb held a virtual meeting with provincial finance ministers to discuss IMF-linked proposals for higher provincial tax and non-tax revenue.
The Express Tribune reported that the centre urged provinces to raise additional revenue, mainly from the agriculture, services and real estate sectors, to meet an IMF condition.
Participants discussed higher income tax on agricultural earnings, property tax, excise duties and broader sales tax collection on services.
Read: IMF Pakistan Tax Reforms Target Weak Farm Recoveries
Officials expect provinces to contribute about 0.3 percentage points toward improving Pakistan’s tax-to-GDP ratio in the next financial year. The talks also covered provincial tax targets and fiscal surplus goals for the next budget.
The revised agricultural income tax rates will apply to farm income generated during fiscal year 2026, while the fiscal impact is expected in fiscal year 2027, officials said. The IMF has not set an agricultural income tax target for the current fiscal year.
The IMF has also urged provincial governments to improve systems for collecting General Sales Tax (GST) on services and bring more sectors of provincial economies into the tax net.
