As Pakistan prepares to present its federal budget for 2025–26 on June 2, the International Monetary Fund (IMF) has called for stricter enforcement of tax laws and the removal of several exemptions to boost government revenue.
According to sources familiar with the discussions, the IMF has urged authorities to crack down on tax evaders by significantly increasing penalties and improving transparency in the taxation system. One of the key recommendations includes raising the fine for Point-of-Sale (POS) fraud from the current Rs500,000 to Rs5 million. The global lender also proposed criminal action against serious tax offenders.
The IMF has emphasized the need for expanding the use of technology to detect tax evasion and plug revenue leakages. These recommendations are expected to be a central part of the upcoming budget and ongoing negotiations between Pakistan and the IMF.
In a push to broaden the tax base, the IMF has also advised the government to eliminate several existing tax exemptions. Notably, it has recommended imposing an 18% General Sales Tax (GST) on previously exempted items such as solar panels, fertilizers, agricultural sprays, and tools. The fund also suggested raising the Federal Excise Duty (FED) on farm equipment and inputs.
Moreover, the IMF proposed expanding the list of luxury items subject to higher taxation and increasing the sales tax on these products to above the current 25%. The goal is to increase revenue from high-income consumers while reducing reliance on borrowing.
Finance Minister Muhammad Aurangzeb, while speaking to the media, stated that the government has not yet finalized any decision regarding salary increases for civil and military staff. However, he assured that relief for the salaried class remains a budgetary priority.
The IMF’s proposals are part of a broader effort to help Pakistan achieve fiscal discipline and long-term economic stability. Talks between the government and the IMF are still underway, and final decisions are expected to be reflected in the budget presentation next week.
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