Pakistan, IMF disagreement continues over tax exemptions on FATA

ISLAMABAD: Disagreements continue between Pakistan and the International Monetary Fund (IMF) over several tax proposals, with key disagreements surrounding the abolition of tax exemptions for the former Federally Administered Tribal Areas (FATA).

According to sources within the Finance Ministry, the IMF is pressing for the removal of tax exemptions for the former FATA regions, but no agreement has been reached. The sources indicate that the IMF has also directed the Federal Board of Revenue (FBR) to maintain a tax target of Rs 12,900 billion for the next fiscal year. However, the FBR remains firm on setting the target at Rs 12,500 billion.

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Further sources reveal that, while a consensus on overall tax targets remains elusive, an agreement has been reached to end the zero-rate regime on milk, imposing an 18 per cent tax on it. Negotiations will continue on this matter.

Additionally, the government has decided to increase taxes on commercial importers of mobile phones and to amend the mobile device manufacturing policy. This includes ending the zero-rate facility provided to the local industry for mobile packaging.

The policy aimed at encouraging local industry to set up mobile packaging units has failed, as not a single unit has been installed, according to the sources.

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As negotiations between Pakistan and the IMF continue, these disagreements highlight the challenges in balancing fiscal targets with economic and regional considerations. Further talks are expected as both parties seek to reach a mutually acceptable resolution.