ISLAMABAD: The International Monetary Fund (IMF) has declined most of the tax cuts and concessions proposed in Pakistan’s Finance Bill 2024-25. However, the IMF agreed to some changes, such as removing GST on textbooks, reinstating rebates for professors and researchers, and eliminating the Federal Excise Duty (FED) on cement.
To compensate for the FED reduction on cement, the government plans to double the FED on international air tickets. The IMF rejected the proposal to restore a fixed income tax regime for export proceeds, insisting on a normal taxation regime for all incomes, including exports.
The government is preparing the Finance Bill for the National Assembly, aiming to adjust the fiscal space created by reducing the Public Sector Development Programme (PSDP) from Rs1,400 billion to Rs1,150 billion. However, the IMF opposes reducing tax rates to use this cushion.
Despite the government’s request, the IMF agreed to remove GST only on textbooks, keeping other stationery items at 18% GST. The IMF also rejected the government’s proposal to enhance FED on cement and resisted subjecting export incomes to normal tax rates instead of a fixed 1% tax.
No major changes are expected in property and tax rates for salaried and non-salaried classes, as the IMF rejected related requests. The IMF also opposes withdrawing the gradual 6% GST for FATA/PATA, with ongoing discussions on this politically sensitive decision.
The federal budget proposes abolishing the 25% tax rebate for full-time teachers and researchers in recognized institutions, but this rebate is expected to be restored.
