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All four provincial governments in Pakistan are preparing to roll out a new, IMF-supported property tax system as part of the fiscal year 2025-26 budget.
This system will shift away from the traditional rent-based valuation method to a capital valuation framework, aiming to enhance fairness and expand the tax net.
According to a recent IMF report, another milestone in tax reform has been achieved. All provinces have revised their Agriculture Income Tax (AIT) frameworks. These updated regimes match the federal personal income tax structure for small farmers. They also follow the corporate income tax model for commercial agriculture. The new tax rules will apply from January 1, 2025.
The tax collected under this new regime for the second half of FY25 will be due in September 2025. To ensure smooth implementation, provinces are working with the World Bank and the IMF. They are developing strong execution plans. Moreover, these include enforcement strategies and compliance tracking. Targeted public awareness campaigns are also part of the plan.
Provinces have also advanced in reforming the General Sales Tax (GST) on services by moving from a positive list approach to a negative list structure, set to be introduced with the start of FY26. This model will exempt key services such as health, education, and government-provided services.
While this negative list is not uniform across provinces, owing to regional factors and pre-existing commitments, it represents a significant step toward tax harmonization.
Efforts to harmonize the property taxation system will be a central focus at the upcoming National Tax Council (NTC) meeting, scheduled for early April 2025. This platform will facilitate inter-provincial coordination as provinces work together to implement the capital-based valuation model.
