IMF asks Pakistan to introduce 45% tax on agricultural income

The IMF has demanded that Pakistan introduce a 45% tax on agricultural income to continue negotiations on a new financial assistance package, Pro Pakistani reported on July 11.

The Fund made it a condition for the country to adapt provincial and federal legislation to ensure compliance with this standard before October of this year.

According to the IMF’s requirement, in addition to the tax on agricultural income itself, the government must introduce a 45% tax on the income of people in the agricultural sector who work as entrepreneurs (without a fixed salary). The IMF also demands the introduction of similar rules in the livestock industry, which has a number of privileges in relation to other areas of agriculture.

Recall that the Pakistani government is currently planning to receive financial assistance from the IMF in the amount of up to $8 billion (705 billion rubles) for a period of three years or more to carry out medium-term economic reforms.

The assistance project is currently at the preliminary approval stage before the package is approved by the IMF staff.

Under the current version of Pakistan’s constitution, the imposition and collection of taxes on the agricultural sector is the responsibility of provincial governments and not the federal level, so the national government currently has no such powers.

Income taxes in Pakistan’s agricultural sector vary significantly from province to province. In Sindh, incomes up to 1.2 million rupees (about 420,000 rubles) a year are not subject to tax, and after that figure they increase from 5 to 15%. At the same time, the average wage earner pays 35% of his income, which is equivalent to 4.1 million rupees (1.4 million rubles) a year.

According to World Bank estimates, the introduction of this tax will allow Pakistan’s budget to receive an additional 1% of GDP, i.e. about 1.2 trillion rupees (about 420 billion rubles).

Read also: IMF programme will not be Pakistan’s last hope: Minister

Source: Rossa Primavera