IMF Blocks Major Tax Relief for Corporate Sector in Upcoming Budget

Islamabad: International Monetary Fund has reportedly stopped the Pakistani government from granting a major tax relief to the corporate sector in the upcoming federal budget for fiscal year 2026-27.

Negotiations between Pakistan and the IMF regarding the next fiscal year’s budget are currently underway. According to sources, the IMF opposed a proposal to withdraw the tax imposed on inter-corporate dividends, leading the Ministry of Finance’s Tax Policy Office to reject the proposed exemption.

The proposal under consideration aimed to abolish the tax on dividends distributed within corporate groups, commonly referred to as inter-corporate dividends. The move was intended to address concerns over double taxation on the same income and to improve balance within the tax system.

However, during budget review discussions with the IMF mission, the proposal was reportedly turned down. Sources said the IMF objected to providing what it viewed as a significant tax concession to the corporate sector at a time when Pakistan is under pressure to maintain fiscal discipline and revenue targets.

Officials in the Tax Policy Office had reviewed the possibility of easing taxation on inter-corporate dividends to support business groups and reduce the repeated taxation burden on companies operating under the same corporate structure.

Sources added that under the current circumstances, the chances of the proposal being implemented are extremely low.