ISLAMABAD: Finance Minister Ishaq Dar announced that the coalition government, which is about to end its tenure, has no intentions of imposing new taxes on the agriculture and real estate sectors.
The government had implemented stringent tight measures to reach an agreement with the International Monetary Fund (IMF). The IMF approved a $3 billion bailout program for Pakistan, of which $1.2 billion was immediately disbursed to aid the struggling economy.
There were reports suggesting that the IMF requested the government to formulate a plan. To impose taxes on the real estate and agricultural sectors in order to receive the remaining bailout funds.
However, the Finance Minister said that no new taxes would be imposed on agriculture or real estate. He emphasized that the government had already faced significant challenges in meeting the IMF’s conditions.
The Finance Minister assured that all the conditions set by the IMF had been fulfilled. The agreement was conducted in a transparent manner.
He further stated that the commitments made with the IMF were available on the finance ministry’s website.
The IMF’s bailout program has already provided some relief to investors in Pakistan’s stocks, exchange rate, and bonds. It will unlock additional external financing. In recent days, longtime allies Saudi Arabia and the United Arab Emirates deposited $3 billion in Pakistan’s central bank. while China rolled over $5 billion in loans to prevent the country from defaulting.
Economist Khaqan Hassan Najeeb’s point of view on Taxes
Economist Khaqan Hassan Najeeb, a former adviser to the finance ministry, acknowledged. That both agriculture and construction sectors are under-taxed in Pakistan. He noted that taxing these sectors more effectively could help broaden the tax base and improve progressivism. For the real estate sector, he suggested implementing a true capital gains tax. Levied at the marginal income tax rate of the individual making the capital gains over the years. This, he believed, would incentivize investment in more productive sectors like manufacturing.
However, Khaqan Hassan Najeeb mentions that such reforms would be better addressed by a long-term new government after the upcoming elections. He also highlighted that provincial governments have the authority to levy the agriculture income tax. Which has contributed very little thus far. The provinces should consider implementing a progressive income tax on agriculture to enhance progressivity. Taking into account the size of farm holdings.
