The government of Pakistan is resisting proposals from the International Monetary Fund to set a Rs. 15.6 trillion tax collection target for the next fiscal year and withdraw sales tax exemptions on fuel and newly constructed homes.
The recommendations emerged during recently concluded staff-level talks between Islamabad and the Washington-based lender ahead of negotiations on the fiscal year 2026–27 budget, which begins in July. According to a report by Express Tribune, the government has not accepted the proposals so far.
Under the IMF’s framework, Pakistan would need to introduce at least Rs. 400 billion in additional revenue measures next year to lift the tax-to-GDP ratio to about 11.3%, roughly 0.3 percentage points higher than the current year’s agreed target. Tax authorities, however, estimate collections may reach only about 10.7% of GDP, highlighting a significant gap.
The IMF also suggested withdrawing or reducing sales tax exemptions on fuel and newly constructed homes as part of efforts to broaden the tax base.
Pakistani officials said the government is reluctant to impose general sales tax on petroleum products because revenues from GST are shared with provinces, unlike the petroleum levy, which is retained entirely by the federal government. The levy on petrol already stands at about Rs. 106 per litre.
Another proposal under discussion includes imposing an 18% sales tax on existing rooftop solar consumers who were earlier exempted when the government shifted from net metering to net billing regulations. Prime Minister Shehbaz Sharif had previously directed authorities to keep existing users exempt after public backlash, but officials said the issue may resurface in the next round of talks scheduled for May.
The IMF also floated the idea of introducing an asset-based tax on small and medium-sized enterprises, including traders. The Federal Board of Revenue has pushed back, arguing it lacks the administrative capacity to assess asset bases for smaller businesses.
Pakistan reached a staff-level agreement with the IMF last week, though final approval by the lender’s executive board remains linked to the government’s ability to recover Rs. 322 billion in taxes from court cases already decided in its favor. Officials said about Rs. 280 billion has been collected so far.
Meanwhile, uncertainty persists over whether the Federal Board of Revenue will meet its revised Rs. 13.98 trillion tax target for the current fiscal year, raising doubts about achieving next year’s proposed Rs. 15.6 trillion goal.
The IMF has emphasized that Pakistan must maintain a primary budget surplus of about 2% of GDP next year, supported by permanent tax policy measures. Any reductions in tax rates for businesses or other sectors, which the government has requested, would need to be offset by new revenue measures, including the possibility of raising the standard sales tax rate, the report said.