IMF Wants Pakistan to Tax Cryptocurrencies

The International Monetary Fund (IMF) wants Pakistan to broaden the range of assets subject to taxation, including cryptocurrencies.

Sources told ProPakistani that the lender as part of its ongoing final review of the $3 billion Stand-By Arrangement has recommended the Federal Board of Revenue (FBR) to bring cryptocurrencies into the tax net by broadening the scope of Capital Gains Tax (CGT).

Besides cryptocurrencies, IMF has advised reviewing CGT slabs for real estate and listed securities to ensure comprehensive taxation of all gains, irrespective of asset holding duration.

Challenges faced by Pakistani authorities were highlighted in taxing real estate transactions due to informal property registration processes. It proposed obligating property developers to monitor and report all property transfers before registration, with penalties for non-compliance for curbing unregistered property transfers.

The lender further suggested removing the provision that exempts capital gains from taxation after a certain ownership period.

These recommendations could potentially be included in the forthcoming bailout package under the Extended Fund Facility (EFF), with the FBR likely mandated to incorporate them into the upcoming budget for FY2024-25 via the finance bill.

The lender also asked to tax either pension contributions or benefits, eliminate the deduction of voluntary payments to workers’ participation funds, withdraw the exemption of pensions, and apply taxation using one of the underlined alternatives.

Other short/medium-term recommendations include eliminating all zero-rating (Fifth Schedule) except for exports. Bring all other goods to the standard rate, and to restrict exemptions (Sixth Schedule) to only supply of residential property (except first sale). Bring all other goods to the standard rate. This will also raise the taxation of fuel in line with the average of comparators in the region and emerging economies.

IMF asked to remove reduced rates under the Eighth Schedule and bring goods thereunder to the standard rate, except a small number of essentials such as food staples and vital education and health items to be taxed at a single reduced rate of 10 percent.

It also suggested removing all compliance-related distortionary tax policy changes. This includes eliminating the minimum taxes and surtaxes, as well as removing the Ninth, and Tenth Schedules.