The International Monetary Fund (IMF) has rejected significant concessions put forth in the Finance Bill 2024.
Despite intense lobbying from exporters, the IMF has declined to permit the reinstatement of a fixed income tax system for export revenues. According to a national daily, the government has suggested raising the fixed tax rate for exporters from 1 percent to 2-3 percent. However, the International Monetary Fund (IMF) has insisted that all incomes, including those of exporters, should be subject to taxation according to the regular system.
Additionally, the lender has accepted the government’s proposition to eliminate Goods and Services Tax (GST) on textbooks, reinstate allowances for academics and researchers, eliminate Federal Excise Duty (FED) on cement, and implement many other technical modifications.
The government is in the process of completing the Finance Bill, which will be formally introduced to the National Assembly within this week. An important issue is the government’s management of the fiscal space amounting to Rs. 250 billion, which has been created by decreasing the Public Sector Development Programme (PSDP) from Rs. 1,400 billion to Rs. 1,150 billion. The IMF warns against utilising this buffer to decrease tax rates.
Pakistan and the IMF have been involved in remote conversations for an extended period of time. The government made a formal request to eliminate the Goods and Services Tax (GST) on stationery items. However, the International Monetary Fund (IMF) only consented to exempt textbooks from the GST, while other items like as pencils, sharpeners, and exercise books remain subject to an 18 percent GST rate.
The proposed Finance Bill 2024 suggests implementing a 1 percent tax on the export proceeds of persons who generate money from exports. This tax would serve as the final tax. The proposal suggests that taxpayers with the same income should pay the same amount of tax. It recommends that income earned from exports should be taxed at regular rates, and an additional 1 percent tax should be collected on the revenues from exports, which would serve as a minimum tax. The International Monetary Fund (IMF) has declined to accept this idea.
The government intends to raise the Foreign Exchange Duty (FED) on international air tickets, thereby doubling the current rate for the upcoming fiscal year.
The IMF has declined all requests for significant modifications to the proposed Finance Bill concerning property and tax rates for both salaried and non-salaried individuals. The IMF opposes the gradual reduction of the Goods and Services Tax (GST) rate by 6 percent for the Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA).
