ISLAMABAD, March 18, 2025 – The International Monetary Fund (IMF) has officially refused to lower transaction taxes for Pakistan’s property sector, rejecting a plea from the Federal Board of Revenue (FBR). The decision comes despite earlier claims by high-ranking officials that the IMF had agreed in principle to reduce the withholding tax on property purchases by 2% from April 1, 2025, pending formal approval.
IMF’s Firm Stance on Tax Reforms
- The IMF’s Resident Representative in Pakistan, Mahir Binci, confirmed that the Fund has not agreed to reduce the withholding tax on property transactions or adjust March 2025 revenue targets.
- The FBR is expected to fall short of its Rs1,220 billion revenue collection target for March, largely due to reduced business activity ahead of Eidul Fitr holidays. Internal projections estimate a shortfall between Rs60 billion and Rs80 billion.
- Pakistani authorities had suggested spreading the revenue shortfall over April and May, rather than shifting the burden to June 2025, which typically sees higher tax collections.
Broader IMF-Pakistan Negotiations
Despite the IMF’s firm stance on tax reductions, Pakistan and the Fund are moving towards finalizing a Staff Level Agreement (SLA) under the $7 billion Extended Fund Facility (EFF).
- Pakistan must now provide written assurances that provincial governments will not engage in wheat procurement, a key IMF condition for securing the next loan tranche.
- The IMF has signaled willingness to augment the existing EFF program with additional climate finance under the Resilience and Sustainability Facility (RSF), potentially unlocking up to $1 billion for the Climate Resilience Fund (CRF).
- Finance Minister Muhammad Aurangzeb has expressed optimism that an agreement will be reached soon.
Impact on Key Sectors
- The property sector, which was anticipating tax relief, may now face a slowdown as transaction costs remain high.
- The tobacco and beverage sectors, which also sought tax reductions, faced similar rejections from the IMF.
- The real estate market is likely to see reduced investment activity due to higher tax burdens on property transactions.
With ongoing IMF negotiations, a looming tax revenue shortfall, and the Eid holiday slowdown, Pakistan’s economic policy adjustments in the coming months will be closely watched by investors and financial analysts.
