IMF Rejects Capital Value Tax on Movable Assets, Approves Tax on Digital Services

Islamabad: The International Monetary Fund (IMF) has rejected the Pakistani government’s proposal to impose a Capital Value Tax (CVT) on movable assets, including gold, cash, and other holdings. According to sources, the government’s efforts to generate revenue through this new levy have failed.
Additionally, the IMF has turned down the proposal to introduce a Federal Excise Duty on day-old chicks. However, the Fund has approved the imposition of taxes on digital services, which is expected to generate around Rs. 10 billion in revenue for the government.
A proposal to increase the tax rate on dividend income from mutual funds to 20% is under consideration, as is a plan to raise the withholding tax on interest income to 20%. The government is also evaluating the withdrawal of tax exemptions granted to venture capital companies.
Furthermore, the removal of income tax exemptions for the cinema industry is being discussed. The existing 35% tax slab for higher incomes will remain unchanged, and a 10% surcharge on monthly incomes above Rs. 500,000 will continue.
The IMF has supported the reduction of tax rates in four middle-income brackets and hinted at minor relief for individuals earning less than Rs. 500,000 per month. However, the proposal to raise the income tax exemption threshold to Rs. 1.2 million annually has not been approved. The initial income tax rate may be reduced from 5% to 1%.
Prime Minister Shehbaz Sharif has been briefed on the preliminary budget proposals. The federal budget is scheduled to be presented in the National Assembly on June 10, while the Economic Survey will be released on June 9, the third day of Eid.