Painful IMF compliance, but no new taxes on agriculture and real estate, clarifies Dar

Finance Minister Ishaq Dar made a resolute declaration on Thursday, assuring the public that the coalition government, despite having taken stern measures that burdened the masses, has no intentions of imposing additional taxes on the agriculture and real estate sectors.

Speaking passionately on the floor of the National Assembly, Dar firmly stated, “I want to state categorically […] that no new tax will be imposed on agriculture or real estate. We have endured much pain in meeting the IMF’s conditions.”

This assurance comes in the wake of the International Monetary Fund (IMF) approving a $3 billion bailout program for Pakistan, with $1.2 billion already disbursed to help stabilise the nation’s struggling economy.

Media reports had indicated that the IMF requested a plan from the government to impose taxes on the real estate and agricultural sectors as a condition to release the remaining funds. The news caused concern among those associated with the agriculture sector, especially since the government had expanded the loan volume to support it in the budget.

Dar emphasised that all prior actions demanded by the lender had been successfully completed, and the agreement with the IMF was carried out in a transparent manner. He reassured the public, “No further burden will be passed on to the people. All the commitments made with the IMF are available on the finance ministry’s website.”

The positive effects of the deal are already evident, with investors in the country experiencing relief in the stocks, exchange rate, and bonds markets. Additionally, longstanding allies Saudi Arabia and the United Arab Emirates have recently deposited $3 billion in Pakistan’s central bank, while China rolled over $5 billion in loans over the past three months to prevent the country from defaulting.

In light of the IMF’s observation that both agriculture and construction sectors are under-taxed in Pakistan, economist Khaqan Hassan Najeeb stressed their significance in broadening the tax base and promoting progressivism.

Regarding the real estate sector, Najeeb advocated for a genuine capital gains tax, levied at the marginal income tax rate of the individual making the capital gains over the years, to encourage investment from unproductive real estate to more productive sectors like manufacturing.

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However, Najeeb acknowledged that such reforms would be better suited for implementation by a long-term new government after the upcoming elections. Moreover, he highlighted that provincial governments hold authority over agriculture income tax, which presently contributes only insignificantly. He urged provinces to contemplate a progressive income tax on agriculture, considering the size of farm holdings.

With Minister Dar’s assurance and the IMF’s support, Pakistan’s economic prospects seem brighter, but the road ahead calls for careful consideration and judicious decision-making to ensure a sustainable and progressive financial future.