ISLAMABAD: The International Monetary Fund (IMF) team is set to question the provincial governments on Friday (Nov 15) on National Fiscal Pact as well as review progress in implementation of tax on agriculture income and real estate sectors, well-placed sources revealed to Business Recorder.
Federal Finance Minister Muhammad Aurangzeb is also scheduled to hold final meeting with the Fund’s team on Friday.
The visiting IMF team led by its mission chief Nathan Porter on Thursday held separate meetings with provincial governments’ representatives and asked about revenue and expenditures.
Reforms in agri income tax regimes: IMF urges provinces to implement commitment
Sources further revealed that representatives from provincial governments on Thursday briefed the IMF team on the provincial budget surplus targets. In the first quarter, the four provinces were tasked with achieving a combined surplus of Rs342 billion; however, they could manage only Rs182 billion. Punjab’s budget deficit of Rs160 billion contributed significantly to the shortfall.
All four provincial governments recorded a budget surplus of Rs159.688 billion during the first quarter of the current fiscal year. The expenditures of the four provincial governments registered at Rs1.760 trillion against revenue of Rs1.92 trillion.
Sources familiar with these meetings revealed that the Fund’s team raised questions on less expenditures on social sector, education and health. The Fund was informed that due to tendering process for procurement, expenditures were relatively low, which were expected to increase in coming months.
As per the structural benchmark, each province amends their Agriculture Income Tax legislation and regime to fully alignit with the federal personal income tax regime by end October 2024, for small farmers and the federalcorporate income tax regime for commercial agriculture, so that taxation cancommence from January 1, 2025 to protect tax revenue. However, none of the provinces met the deadline, sources added.
While the Punjab cabinet and Khyber Pakhtunkhwa government have approved the bill, Sindh and Balochistan have yet to make progress on this legislation regarding tax on agricultural income, according to sources.
The IMF team will be briefed on the reasons behind these delays, as all four provinces have signed the National Fiscal Pact as per IMF’s conditions. Sources from the Ministry of Finance note that under the IMF agreement, certain federal expenses — such as higher education, healthcare, social security, and regional infrastructure development — are expected to be transferred to the provinces. The IMF mission has already highlighted the role of provinces in economic and tax reforms.
Copyright Business Recorder, 2024