IMF says farm income tax collection remains below expectations

ISLAMABAD: The International Monetary Fund (IMF) has expressed concern over continuing reduction in FBR tax recoveries and declared limited taxes a threat.

The IMF in its report stated that the tax collection could reach to 2100 billion rupees with 35% improved performance in sales tax recovery.

The farm income tax was enhanced in Year 2025, but its recovery remains below the expectations. The lending institution has stressed for reforms to expand the FBR tax net. The IMF urged for mandatory digital invoicing and an effective production monitoring system.

The IMF has said that the new audit manual and audit policy in FBR are expected by August 2026. It has also suggested to bring the new tax holders in the tax net and more strict tax registration scheme for retailers.

The IMF report has also advised the government to take steps to limit financial transactions for the non-filers in the next federal budget.

“The farm sector despite 24.6% contribution to the GDP pays only 0.3% tax,” IMF report pointed out.

The IMF has also declared the textile, real estate and business services as least tax paying sectors of the economy.

“Separate GST systems in provinces have aggravated complications”, according to IMF report.

The IMF report has stressed for strict registration of retailers to increase the net sales tax.

The IMF also advised provinces in its report to use the FBR data for enforcement of the agricultural tax.

The IMF earlier said that Pakistan’s economy is showing signs of stability following the latest review under its loan programme, despite challenging global conditions and the ongoing conflict in the Middle East.

The IMF projected Pakistan’s economic growth at 3.6 per cent for fiscal year 2026, while inflation is expected to average 7.2 per cent during the current fiscal year. The unemployment rate is forecast to stand at 6.9 per cent.