The International Monetary Fund (IMF) has recommended that the newly-elected government of Pakistan implement an 18% General Sales Tax (GST) on essential items such as food, medicines, petroleum products, and stationery.
The recommendations, outlined in a report dispatched to Islamabad, were provided following the IMF team’s visit to Pakistan in December 2023, with the report arriving in February 2024, ahead of the FY2024-25 budget.
The IMF’s suggestions include bringing numerous items under the standard 18% GST rate, aiming to generate an estimated 1.3% of Gross Domestic Product (GDP) revenue, equivalent to Rs1,300 billion in the national exchequer.
Additionally, the IMF calls for the removal of distortionary tax policy changes related to compliance, including the abolition of minimum taxes and additional taxes, as well as the elimination of the Ninth and Tenth Schedules.
Last month, reports indicated that Pakistan is exploring a loan package from the IMF, seeking an additional $1.5 billion in climate finance, potentially increasing the overall program to $7.5-8 billion.
