IMF has reportedly urged Pakistan to build a comprehensive database of tax non-filers and intensify monitoring of digital transactions to widen the country’s tax compliance net
By S.M. Inam
ISLAMABAD: The International Monetary Fund (IMF) has entered a decisive phase of negotiations with Pakistan over the 2026–27 federal budget, simultaneously pushing for sharper revenue mobilization on one hand and a significant expansion of social protection spending on the other.
According to officials familiar with the talks, discussions have centered on a dual-track reform agenda: widening the tax base through stricter enforcement measures while strengthening cash support for low-income households under the Benazir Income Support Program (BISP). The talks are taking place alongside broader consultations with the Federal Board of Revenue (FBR) on fiscal and administrative reforms.
On the revenue side, the IMF has reportedly asked Pakistan to compile a comprehensive database of non-filers and intensify the use of digital transaction data to expand tax compliance. Authorities are preparing to roll out a nationwide digital invoicing system in the 2026–27 fiscal year, under which only electronic invoices would be recognized, a measure expected to significantly tighten oversight of commercial activity.
Further proposals under discussion include amendments to the Sales Tax Act’s third schedule, potentially bringing a range of essential consumer goods—including milk, dairy products, cooking oil and infant formula—into a broader taxation framework. In parallel, a simplified tax regime for retailers with annual turnovers between Rs20 million and Rs25 million is also being considered, with liability linked to electricity consumption data.
While additional revenue measures are projected to generate substantial fiscal gains, authorities are also weighing structural adjustments to existing levies, including the possible gradual phase-out of the super tax, though taxes on inter-corporate dividends are expected to remain intact.
At the same time, the IMF has proposed a notable expansion of Pakistan’s social safety net. Under discussions on BISP, the Fund has suggested increasing quarterly cash transfers from Rs14,500 to around Rs20,000 per beneficiary household.
Officials say the proposal is part of wider consultations on strengthening beneficiary identification systems under the Kafaalat program, improving registration mechanisms, and enhancing the overall targeting of social assistance.
