The International Monetary Fund (IMF) has asked Pakistan to phase out all sales tax exemptions and implement a uniform sales tax regime as negotiations over the upcoming federal budget enter their final stage.
According to sources, officials from the International Monetary Fund and the Federal Board of Revenue (FBR) held several meetings to finalize revenue targets and taxation measures for FY2026-27.
The IMF is reportedly pushing for a tax collection target of Rs. 15.264 trillion for the next fiscal year, while FBR authorities are continuing discussions to secure a comparatively lower target.
Sources revealed that the IMF has also proposed enforcement-based revenue measures worth Rs. 778 billion alongside approximately Rs. 430 billion in additional taxes to strengthen Pakistan’s fiscal position during FY27.
FBR officials are expected to share details with the IMF regarding sectors and areas where new taxation measures could be introduced in the upcoming budget.
According to officials familiar with the discussions, Pakistan and the IMF have largely agreed to maintain the tax-to-GDP ratio target at around 11.2 percent for the next fiscal year, though talks on broader sales tax reforms are still underway.
The IMF has reportedly recommended abolishing all categories of sales tax exemptions while introducing a single uniform sales tax rate across all sectors of the economy.
Sources said the Fund has suggested reducing the higher sales tax rate from 22.8 percent to 18 percent, provided that preferential tax treatments, concessions, and sector-specific exemptions are completely removed.
The proposed reforms are aimed at broadening the tax base, improving revenue collection, simplifying the taxation system, and reducing distortions created by multiple tax rates and exemptions across industries.
