Key Takeaways
- IMF warns provincial governments over poor collection from farmers.
- Agriculture income tax rates increased but targets remain unmet.
- Sindh and Punjab struggle to meet their fiscal year targets.
The International Monetary Fund (IMF) has expressed concern over Pakistan’s weak revenue collection from farmers, despite a significant increase in tax rates. The IMF has warned provincial governments about their performance, particularly in agriculture income tax collection.
Agriculture income tax rates have been raised from 15 percent to 45 percent, yet revenue targets continue to be unfulfilled. Sindh collected Rs. 1.1 billion against its Rs. 2 billion target, and the province has set a Rs. 6 billion target for the current fiscal year, which it is likely to miss by at least Rs. 3 billion.
Punjab collected Rs. 4 billion against its Rs. 10.5 billion target last fiscal year. The province has now increased its target to Rs. 12.5 billion for the current fiscal year, but it faces challenges in meeting this higher target.
The weak collection is a concern as the Federal Board of Revenue (FBR) itself missed its downward-revised tax target by Rs. 929 billion last fiscal year. The FBR assured the IMF that it will meet its key performance targets this year, but the full annual tax target of Rs. 15.263 trillion remains uncertain.
Sindh has introduced digital registration and filing systems to improve tax collection. So far, 3,650 people have registered under the new system, while 1,912 returns have been filed. However, the province still needs real-time data sharing between the FBR and the Sindh Revenue Board to enhance collection efforts.
The FBR shared data with Sindh on 44,350 people who declared agriculture income in their tax returns for the tax year 2025. This data is crucial for improving tax collection, but the province is still facing significant challenges in meeting its targets.
The IMF has also asked how the provinces plan to improve collection and whether the FBR can provide better information about agriculture income. The FBR has acknowledged the need for better data sharing and has introduced new systems to facilitate this.
The situation highlights the ongoing challenges faced by Pakistan in improving its tax collection mechanisms, particularly in the agriculture sector, which is a significant contributor to the economy.
