ISLAMABAD: Seeking effective and practical steps for the realisation of agriculture income tax and improvements in retail sector taxation, the International Monetary Fund (IMF) has yet to take a position on Pakistan’s request for relief measures in the upcoming budget, due on June 2.

The authorities, however, have committed to meeting any revenue shortfall through reduced expenditure in the Public Sector Development Programme (PSDP) during the current year. An increase in the petroleum levy and the introduction of a carbon levy on petroleum and other energy products are expected to be part of the forthcoming budget, sources said.

Informed sources told Dawn that, on the directives of Prime Minister Shehbaz Sharif, officials at the Ministry of Finance and the Federal Board of Revenue (FBR) have discussed possible relief measures with the IMF mission, which has been engaged in budget discussions since May 14. Among the proposed concessions is an average 2.5 per cent reduction in income tax rates across all salaried income slabs.

However, this proposal hinges on IMF staff being satisfied with the government’s revenue plan that supports the programme’s target of a 1.6pc primary budget surplus — approximately Rs2.1 trillion. An official told Dawn that discussions on budget targets are still ongoing and that no measures have been finalised.

Authorities pledge PSDP cuts to cover revenue gap

Datasheets and projections, in line with the proposed budgetary framework reviewed in the first biannual review a few weeks ago, have been shared with the IMF. Responses to the Fund’s queries are currently being compiled. The official said that the IMF’s position on the proposed revenue and expenditure strategy will become clearer once its staff analyses the data through its software-based framework.

He added that the IMF has neither accepted nor rejected the proposed relief measures for the budget, contrary to reports in certain quarters. Formal discussions regarding budgetary proposals for the real estate sector have yet to take place.

The government’s “Tajir Dost” scheme for retailers, meanwhile, has failed to yield the desired results and is likely to be replaced by a more effective revenue collection strategy.

The IMF has also emphasised the need to reduce provincial expenditures and increase provincial revenue contributions to maintain fiscal discipline and progress towards implementing a national fiscal pact. A key priority at the provincial level, according to the Fund, should be the effective enforcement of agriculture income tax beginning September 2025.

The government has pledged to withhold PSDP disbursements to offset revenue shortfalls and expects additional tax revenues through the resolution of litigation cases. The Fund has already acknowledged the authorities’ commitment to pursuing resolution of outstanding legal cases — worth Rs367 billion out of a total Rs770bn under dispute. These include cases before the Supreme Court (Rs43bn), high courts in Islamabad, Sindh and Lahore (Rs217bn), and the Appellate Tribunal Inland Revenue (Rs104bn).

A favorable SC ruling could effectively resolve cases involving an estimated Rs120bn, according to the IMF.

Published in Dawn, May 22nd, 2025