IMF Urges Pakistan to Include Cryptocurrency and Real Estate in Taxation Framework

Jimmy Aki
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The International Monetary Fund (IMF) has provided tax recommendations to Pakistan’s Federal Bureau of Revenue (FBR). This decision came from IMF’s ongoing review of a $3 billion bailout aid to bring the country out of its economic crisis.

IMF Aims for Comprehensive Taxation of All Asset Profits

On March 18, 2024, a local news outlet reported that the IMF has proposed expanding Pakistan’s Capital Gain Tax (CGT) framework. This ensures the coverage of assets such as cryptocurrencies, real estate, and listed securities for tax eligibility.

According to the international money lender, implementing this measure would enable revenue generation from these taxable assets. The IMF further noted these recommendations are requirements for approval and disbursement of a $3 billion bailout to the country.

Addressing the importance of IMF’s measures, the local report stated that the money lender revealed some tax challenges the Pakistani authorities face.

Currently, the country has no effective policy for accessing and collecting taxes on capital gains from real estate.

The IMF’s recommendation noted that real estate interest (ownership) is not officially registered until the property is legally completed. As a cause-effect, transfers of interest in real estate are not recorded before completion – making them unknown.

Consequently, all profits generated by property developers and sellers, such as transfer of interest in uncompleted properties, are also untaxed.

The IMF further suggested more real estate policies to mitigate tax evasion and generate more revenue for Pakistan.

These policies include the obligation of real estate developers to track and report all property transfers effectively.

The completion and registration of property titles were also part of the recommendations provided to Pakistan.

Non-compliance with these measures is expected to result in the government imposing sanctions such as hefty fines.

Meanwhile, the IMF has also suggested the need for the Pakistani authorities to amend its “Personal Moveable Property” category in the Income Tax Ordinance.

Pakistan
ALT: FBR’s Income Tax Ordinance

This proposed change would create a “catch-all” section that would include all properties that can be held as investments. However, the amended “Personal Moveable Property” category will exclude investments in trade stocks or assets that depreciate or amortize.

Overall, the proposed amendment ensures the collection of annual taxes on capital gains from real estate assets.

An agreement to implement all these measures would qualify Pakistan for the bailout, which would see the initial disbursement of $1.1 billion.

Pakistan plans to use the bailout funds to rebound from one of its worst economic crises. Since 2022, the country has been affected by natural disasters, particularly climate-induced floods, affecting economic productivity.

Over a thousand people have died, and a staggering loss of $30 billion was recorded as an economic loss. The situation has worsened over the past 13 months due to geo-political tension and unstable governance.

Nonetheless, many observers believe the government will accept and integrate IMF’s measures as a requirement protocol to generate higher revenues.

 

IMF & Pakistan Potential Collaboration: What Comes Next?

Pakistan has made giant strides in developing artificial intelligence (AI). The country has significantly invested in its research and application.

Traders rely on AI fraud detection and algorithm trading AI to navigate the financial markets.

The healthcare system has also embraced the utilities of AI. Platforms like Sehat Kahani leverage AI to connect female doctors to rural communities through telemedicine.

The Agricultural sector is touted as the heartbeat of the Pakistani economy, and it has benefited from AI capabilities. AgriTech startups like Ricult have used AI to build mobile apps that provide data on soil compounds and weather forecasts.

In light of this, the IMF’s $3 billion bailout aid and AI development create a positive growth trend for Pakistan’s economy.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.