IMF Urges Pakistan to Raise General Sales Tax to 18%

The International Monetary Fund (IMF) mission has advised Pakistan to raise its general sales tax (GST) to 18%, as part of discussions held over multiple rounds regarding a potential new loan arrangement.

During extensive talks between the IMF delegation and Pakistani authorities, concerns were raised about the current sales tax collection system, which currently sees the central government responsible for tax collection on commodities.

The IMF proposed centralizing sales tax collection under the federal government’s management. Additionally, they suggested eliminating GST exemptions and increasing the tax rate to 18% on both commodities and services.

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In the fourth round of discussions, the IMF delegation emphasized the need for reforms in the insurance sector, advocating for the establishment of a dedicated regulatory body. As part of these reforms, the IMF recommended the privatization of three government-owned insurance companies.

The timing of the IMF delegation’s visit aligns with Pakistan’s interest in securing another program with the international lender to alleviate financial constraints.