ISLAMABAD: The International Monetary Fund (IMF) has firmly turned down the Federal Board of Revenue’s (FBR) request to reduce property tax and related transaction levies for the real estate sector at this stage.
Earlier, senior officials had claimed that the IMF had agreed in principle to cut withholding tax on property transactions by 2%. This reduction was expected to take effect from April 1, 2025, pending formal approval. However, the IMF has now officially confirmed that no such agreement was made regarding cuts in property tax or transaction charges.
This decision marks another blow to FBR’s efforts. The IMF had already dismissed similar requests related to lowering tax rates on tobacco and beverages. Now, the final plea by FBR to reduce real estate tax has also been rejected.
Meanwhile, talks between Pakistan and the IMF continue to progress towards a Staff Level Agreement (SLA). But before sealing the deal, the IMF wants written assurances from Pakistan. The Fund is seeking guarantees that provincial governments will refrain from wheat procurement activities.
On a positive note, the IMF has shown readiness to extend Pakistan’s existing $7 billion Extended Fund Facility (EFF). It plans to enhance it through additional support under Resilience and Sustainability Facility (RSF). This proposal will go before the IMF’s Executive Board, along with Pakistan’s request for the second tranche of funding.
Although the exact volume of RSF funding is still unclear, estimates suggest Pakistan could receive up to $1 billion under the Climate Resilience Fund (CRF). The country’s Finance Minister Muhammad Aurangzeb expressed hope last Friday that both sides are close to finalizing the SLA.
The IMF’s Resident Chief in Pakistan, Mahir Binci, also clarified the situation. He told this reporter, “The IMF has not agreed on a lower withholding tax on property transactions and has not agreed to revise the March 2025 tax targets.”
Sources inside the government believe that the FBR will fail to meet its current monthly revenue target. Whether the IMF agrees or not, a shortfall is expected. The target for March 2025 stands at Rs1,220 billion, but current projections suggest it will not be met.
Internal estimates by the FBR indicate a revenue shortfall of Rs60 to 80 billion. This gap is due to a higher number of public holidays during Eid ul Fitr, which will affect tax collection. To manage this gap, FBR has suggested shifting the shortfall to April and May 2025 instead of June 2025, when higher collections are usually expected in the closing month of the fiscal year.
The continued refusal to reduce property tax, along with strict revenue expectations, puts pressure on FBR’s tax policies. As the real estate sector hoped for a relief in property levies, the IMF’s rejection of any changes in transaction taxes has left no room for optimism.
Despite this setback, talks around the Climate Resilience Fund and SLA remain crucial. But Pakistan’s economic managers must now focus on achieving targets without any relaxation in real estate taxation or property transaction levies.
