IMF suggests higher taxes on agricultural inputs

The International Monetary Fund (IMF) has suggested that Pakistan increase taxes on key agricultural items as part of discussions for the upcoming federal budget. Specifically, the IMF wants the government to raise the tax on fertilizers from 5% to 10% and to introduce a new 5% tax on pesticides.

However, Prime Minister Shehbaz Sharif and his economic team are pushing back against this proposal. They believe it would hurt farmers and put too much pressure on the already struggling agriculture sector.

The government is trying to either stop or reduce these proposed tax increases through ongoing talks with the IMF.

A key meeting between IMF regional head Jihad Azour and Pakistan’s Finance Minister Muhammad Aurangzeb took place on Wednesday to discuss budget plans and financial goals under the new IMF program.

The Pakistani government argues that these tax hikes are unnecessary, especially since an Agriculture Income Tax (AIT) is set to start on July 1, 2025. This new tax is expected to bring in Rs40 to Rs50 billion per year, though actual revenue may vary.

A government official warned that if the IMF’s full tax proposal is accepted, it could cost farmers Rs30 to Rs40 billion. This could also raise food prices and reduce crop output nationwide.

Overall, the situation shows how Pakistan is trying to balance IMF demands with protecting its crucial farming sector, which supports much of the country’s population and food supply.

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