$7bn bailout review approval: IMF likely to retrospectively endorse delay in agriculture tax collection

ISLAMABAD: With possibility of granting a waiver over delay in the collection of Agriculture Income Tax (AIT) by the provinces by the IMF, the Fund review mission has sought details from provincial revenue authorities on their preparedness of AIT collection from July 1, 2025. The visiting IMF team also asked the provinces to convert collection of the GST on services from positive to negative list from next fiscal year 2025-26.

The visiting IMF mission and all the four provinces analysed performance on the National Fiscal Pact (NFP) signed among the Centre and the four provinces under the IMF conditionalities.

“The IMF seemed lenient over delay in collection of AIT as workshop in collaboration with the World Bank was held recently in Islamabad where the Bank was given the mandate to prepare future roadmap for collection of AIT from the next fiscal year, with effect from July 1, 2025,” top official sources confirmed while talking to The News here on Wednesday.

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 IMF also asked to develop, implement and collect revenue under a common approach to property taxation, implement the necessary administrative reforms to narrow the tax compliance gap, including for the GST. The IMF also asked to share details on National Tax Council terms of reference which will be expanded to include the design of the relevant tax measures, including property tax and the necessary legal and administrative changes to implement them. Renowned economist Dr Hafiz A Pasha has estimated that the potential of Agriculture Income Tax (AIT) for all the provinces stood at Rs880 billion. In his latest research paper, Dr Hafiz A Pasha says that the overall provincial tax to GDP ratio of the four provinces combined is very low at 0.7 percent of the GDP. Sindh has the highest tax to GRP ratio of 1.2 percent, while the lowest ratio is that of Khyber-Pakhtunkhwa at less than 0.4 percent.