IMF asks for reviewing tax slabs on real estate and listed securities.
IMF wants cryptocurrencies brought into tax net. The International Monetary Fund (IMF) has advised the Federal Board of Revenue (FBR) to broaden the scope of the Capital Gains Tax (CGT) by incorporating cryptocurrencies into the taxable domain. This recommendation was disclosed during ongoing review talks between the IMF and Pakistani authorities regarding the $3 billion stand-by arrangement (SBA).
The discussions, spanning four days and commencing last Thursday, hold significant implications. A successful outcome could trigger the release of approximately $1.1 billion, the final tranche secured by Islamabad last summer, thus preventing a potential sovereign debt default.
In its deliberations, the IMF emphasized the necessity of scrutinizing real estate tiers and listed securities to ensure comprehensive taxation of all profits, eliminating the practice of tax exemption based on asset-holding duration.
Furthermore, the IMF proposed binding property developers to monitor and report all transactions preceding property title registration, with penalties imposed for non-compliance. This directive aims to curb the prevalent phenomenon of trading files of various plots within housing schemes, bringing such activities under the tax purview.
These recommendations are poised to feature prominently in the upcoming bailout package under the Extended Fund Facility (EFF). Consequently, the FBR may be obligated to incorporate these measures into the fiscal budget for FY2024-25 through the finance bill.
The IMF’s technical assistance report highlighted challenges faced by Pakistani authorities in assessing and collecting taxes on capital gains from real estate disposals. It pointed out that due to the absence of formal registration until property completion, gains from interim property transfers remain untaxed.
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To address this, the IMF proposed obligating property developers to track and report all property interest transfers pre-completion, with penalties enforced for non-compliance. Additionally, the IMF recommended expanding the range of assets subject to capital gains taxation, including emerging investment avenues such as cryptocurrencies.
The IMF also advocated for revising tax slabs on real estate and listed securities to ensure equitable taxation and eliminate provisions granting tax exemption based on asset-holding duration.
These initiatives, if implemented, are expected to strengthen Pakistan’s taxation framework, enhancing revenue generation and fiscal stability while promoting transparency and accountability in the financial sector.
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