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The IMF demands an 18% sales tax on everything, putting the government in a difficult situation.

The next bailout package’s preconditions include increasing electricity prices from July and adjusting gas prices. The FBR will need to set a tax collection target close to 12,900 billion rupees.

IMF Demands 18% Sales Tax on All Items, Pushing Government into Difficulties

Islamabad (UrduPoint Latest News – May 25, 2024) – The IMF’s demand for an 18% sales tax on all items has put the government in a difficult position. The next bailout package’s other preconditions include increasing electricity prices from July and adjusting gas prices. According to Express News, the IMF requires the Federal Board of Revenue (FBR) to set a tax collection target close to 12,900 billion rupees.

A target of 12.9 trillion rupees means the FBR will need to collect an additional 3,700 billion rupees in just one year. The IMF has linked the new bailout package agreement to the prior approval of its Executive Board. The Ministry of Finance had informed the Prime Minister that the tax targets for the next fiscal year are 12.4 trillion rupees, which have now been increased to 12.9 trillion rupees.

After the IMF mission’s departure, the Ministry of Finance briefed the Prime Minister on the overall budget size and expenditure-related conditions. The Prime Minister was informed that if Pakistan implements the condition of withdrawing sales tax exemptions, an 18% sales tax will be imposed on all items sold in Pakistan, except essential food items and those protected under sovereign deals. The Prime Minister was told that without withdrawing all sales tax exemptions, an agreement with the IMF is not possible.

The Prime Minister did not make an immediate decision after learning about the IMF’s conditions but asked the Ministry of Finance to review these measures. It is worth noting that yesterday, IMF Mission Chief Nathan Porter said that fair tax collection in Pakistan is desired. Reforms in Pakistan’s energy sector are necessary, and monetary policy should be used to control inflation.

Negotiations between Pakistan and the International Monetary Fund (IMF) have concluded, after which the IMF’s Mission Chief issued a statement on the talks. The IMF Chief further stated that extensive negotiations were held to improve Pakistan’s economy, with discussions taking place from May 13 to May 23. Pakistan aims to increase its revenue, and detailed discussions on the privatization of state-owned corporations were also held. Policy negotiations with Pakistan will continue.

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