ISLAMABAD: The International Monetary Fund (IMF) has firmly rejected the Federal Board of Revenue’s (FBR) request to reduce property taxes 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 a 2% cut in withholding tax on property transactions, 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 any cuts in property taxes or transaction charges.
This decision deals another setback to the FBR’s efforts. The IMF had previously dismissed similar requests to lower tax rates on tobacco and beverages. Now, the final attempt to secure a tax break for the real estate sector has also been turned down.
Meanwhile, talks between Pakistan and the IMF continue to move forward towards a Staff-Level Agreement (SLA). However, before finalizing the deal, the IMF is seeking written assurances from Pakistan, particularly commitments from provincial governments to refrain from wheat procurement activities.
On a positive note, the IMF has expressed readiness to extend Pakistan’s existing $7 billion Extended Fund Facility (EFF) by providing additional support under the Resilience and Sustainability Facility (RSF). This proposal, along with Pakistan’s request for the second tranche of funding, will be presented to the IMF’s Executive Board.
Although the exact volume of RSF funding remains uncertain, estimates suggest that Pakistan could receive up to $1 billion under the Climate Resilience Fund (CRF). Pakistan’s Finance Minister Muhammad Aurangzeb expressed optimism last Friday, stating that both sides are close to finalizing the SLA.
The IMF’s Resident Chief in Pakistan, Mahir Binci, further clarified the situation. Speaking to this reporter, he said, “The IMF has not agreed on a lower withholding tax on property transactions and has not agreed to revise the March 2025 tax targets.”
Government sources believe that the FBR is likely to miss its current monthly revenue target. Regardless of the IMF’s decision, a shortfall is expected. The revenue target for March 2025 is set at Rs1,220 billion, but current projections suggest it will not be achieved.
Internal estimates by the FBR indicate a revenue shortfall of Rs60 to 80 billion, mainly due to an increased number of public holidays during Eid ul Fitr, which will disrupt tax collection. To manage the gap, the FBR has proposed shifting the shortfall into April and May 2025, rather than June, when traditionally higher collections are expected at the fiscal year’s close.
The IMF’s continued refusal to ease property taxes, combined with strict revenue expectations, is placing significant pressure on the FBR’s tax policies. While the real estate sector had hoped for relief, the IMF’s rejection of any change in transaction taxes has left little room for optimism.
Despite this major setback, negotiations around the Climate Resilience Fund and the SLA remain critical. Pakistan’s economic managers must now focus on meeting fiscal targets without any relaxation in real estate taxation or property transaction levies.
