IMF pushes for higher taxes on fertiliser, pesticides
PM Shehbaz Sharif and his team working to avoid or reduce proposed tax rates on major inputs of farm sector
May 22, 2025
- IMF calls for FED increase on fertiliser from 5% to 10%.
- Global lender also proposes new 5% tax on pesticides.
- IMF's visiting director for Mideast to meet PM Shehbaz today.
ISLAMABAD: The International Monetary Fund (IMF) is pressing Pakistan to significantly increase taxes on key agricultural inputs in the upcoming budget, a move that Prime Minister Shehbaz Sharif and his team are reportedly striving to mitigate or avoid.
Sources indicate that the IMF has specifically called for an increase in the Federal Excise Duty (FED) on fertiliser, from the current 5% to 10%, The News reported on Thursday.
Additionally, the global lender is proposing a new 5% tax on pesticides.
The demands were part of discussions held Wednesday between Jihad Azour, the IMF's visiting director for the Middle East, and Pakistan's Finance Minister Mohammad Aurangzeb, at the Ministry of Finance, as they work towards finalising the national budget.
PM Shehbaz is reportedly making efforts to persuade the IMF to reconsider these proposed tax hikes, arguing that they would place an undue burden on the farm sector.
A key point of contention for Pakistan is the impending implementation of the Agriculture Income Tax (AIT), which is set to become operational from July 1, 2025, with the next budget.
While precise revenue projections for the AIT are still in their early stages, various estimates suggest that provinces could generate between Rs40 to Rs50 billion from farmers in the short term.
"The revenues estimate for increased FED on fertiliser from 5% to 10% and slapping FED on pesticides at the rate of 5% is projected to fetch tax revenues of Rs30 to Rs40 billion from the pockets of farmers in the next fiscal year if the wish of the IMF is fulfilled," top official sources confirmed to The News on Wednesday.
Azour is expected to meet PM Shehbaz today.
Another proposal under consideration between the IMF and Pakistani authorities is to ensure equivalent taxation of all sources of income and introduce a single turnover-based registration threshold for both income and GST registration to all businesses in the upcoming budget.
